Credit rating agency, Fitch Ratings, has affirmed the Long-Term Issuer Default Ratings (IDRs) of First Bank of Nigeria Limited (FBN) and its parent company, FBN Holdings Plc, at ‘B-‘ with a negative outlook.
The affirmation according to Fitch Ratings, reflects corporate governance failings of the fully Nigerian-owned bank.
Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele on April 29, 2021, removed the non-executive directors on the boards of FBNH and FBN and replaced them with the Central Bank’s own appointees.
The removal of the board members of FBN Bank, according to the Governor was due to the fact that the board had made significant executive management changes, including replacing the CEO, without the prior notice or approval of the Central Bank.
Justifying its decision to sack all board members and replace them with its own appointees, CBN led by Governor Emefiele averred the decision was in the interest of financial stability and minority shareholders.
He also highlighted corporate governance failings pertaining to long-standing and problematic related-party exposures, and failure to comply with regulatory directives as another reason for the removal of the board.
According to Fitch Ratings, any remedial actions imposed by the CBN, including a potential reclassification of related-party exposures will not have a material effect on the group’s asset quality, profitability and capitalisation as its outlook remains negative, reflecting FBN’s pre-existing asset quality and capitalisation weaknesses as well as the group’s corporate governance weaknesses as already highlighted by the CBN.
Fitch Ratings affirmation of FBN and FBNH’s Long-Term IDR at ‘B-‘ with a negative outlook, implies that bonds issued by the bank or the group are of a non-investment grade and present an appreciable level of credit risk with the bank or the group possibly defaulting on payments of coupon rates or face value of bonds at maturity.
