Transcript of "FirstBank Nigeria Annual Report & Accounts 2010"
TRANSFORMATION FIRST BANK OF NIGERIA PLC ANNUAL REPORT & ACCOUNTS 2010N I G E R I A | L O N D O N | J O H A N N E S B U R G | PA R I S | B E I J I N G
About FirstbAnkFirstBank has its headquarters in Lagos, Nigeria and an international presencein London, United Kingdom; Paris, France; Johannesburg, South Africa; andBeijing, China.Drawing from our experience, spanning 117 years, we continue to consolidate our footprint in Nigeria, diversify and transform our bankand build scale internationally. The Bank enjoys natural premium respect and first-mention privilege in the market (an excellent corporategovernance structure underpinned by strong institutional processes, systems and controls, a history of seamless leadership succession, a soundrisk management framework, several globally recognised awards and experienced management).The FirstBank Group is well diversified with contribution to national economic development through subsidiaries involved in capitalmarket operations, insurance services, asset management and investment banking, private equity/venture capital, pension fund custodianmanagement, registrar services, trusteeship, mortgage and microfinance banking. Within the Bank, we are structured along corporate, public,retail, institutional and private banking customer segments, giving us the ability to drive deeper product penetration and develop sectorexpertise with relationship management based on a deep understanding of customer needs.With a primary listing on the Nigerian Stock Exchange, about 32.6 billion issued shares and one of the highest shareholders’ funds inthe Nigerian landscape, FirstBank is owned by over 1.3 million shareholders across the globe and has an unlisted Global DepositaryReceipt (GDR) programme.The Bank continues to enjoy strong ratings from Standard & Poor’s, Fitch, Global Credit Rating and Agusto & Co. During the year, FirstBankattained ISO/IEC 27001: 2005 Information Security Management Systems (ISMS) certification from the British Standards Institution (BSI)indicating its strictest adherence to the security and protection of the information of its over five million customers in over 600 locationsin Nigeria. Visit our online report at www.firstbanknigeria.com/ir/ financialinformation/2010 • Quick and easy navigation • Search tool • Download the full report • Download report sections • Download Excel files • ‘Compare to last year’ function Visit our investor relations website at www.firstbanknigeria.com/ir/ Financial calendar www.firstbanknigeria.com/ir/financialcalendar Credit ratings www.firstbanknigeria.com/ir/ratingreports
www.firstbanknigeria.com/annualreport/2010/ First Bank of Nigeria Plc Annual Report & Accounts 2010 1CONTeNTs INTRODUCTION FINANCIAL sTATeMeNTsOverview 2 statement of significant accounting policies 138 INTRODUCTIONFinancial highlights 4 Balance sheet 143Chairman’s statement 6 Profit and loss account 144Former Chairman’s statement 7 Cash flow statement 145Quick read Notes to the financial statements 146 Growth 10 Financial risk analysis 177 Service delivery and operational excellence 12 Group statement of value added 185 Performance management 14 Bank statement of value added 186 Talent management 16 Group five-year financial summary 187 BUsINess ReVIeWLeadership and governance 18 Bank five-year financial summary 188Awards 22 COMPANY INFORMATION BUsINess ReVIeW Group and department heads 190Group Managing Director/ subsidiary MDs and Audit Committee 192Chief executive Officer’s review 24 Contact information 193Operating environment and outlook 29 Branch network 194strategy and performance Our approach 32 RIsK MANAGeMeNT AND GOVeRNANCe Group strategy 33 sHAReHOLDeR INFORMATION Bank strategy 37 shareholder information Bank operating structure 46 Global depositary receipts (GDR) programme 214 Key Performance Indicators 57 Share statistics 214 Key risk summary 62 Dividend history 214Financial review 67 Financial calendar 215Corporate social responsibility 84 Share capitalisation history 216 Notice of Annual General Meeting RIsK MANAGeMeNT AND GOVeRNANCe Proxy form sTATeMeNTs M-access FINANCIALChief Risk Officer’s report 90 shareholder online access registration formRisk management framework e-share notifier subscription form Our approach 92 stockbroker e-lodgement activation form Governance 94 Internal control 96Risk management disclosure Glossary of ratios Credit risk 99 Abbreviations INFORMATION Market risk 105 COMPANY Liquidity risk 109 Operational risk 112 Information security risk 116 Compliance risk 119 Legal risk 121Directors’ report 122Corporate governance report 127 sHAReHOLDeR INFORMATIONAccountability and audit Responsibility statement 132 Report of the External Consultant on the Board Appraisal 133 Report of the Independent Joint Auditors 134 Audit Committee statement 135Directors and advisers 136
2 INTRODUCTION First Bank of Nigeria Plc Annual Report & Accounts 2010 OVeRVIeW OF FIRsTBANK Group structure FBN BANK (UK) FIRsTBANK LIMITeD The FirstBank Group comprises 10 subsidiaries, spanning asset management, investment banking, capital markets, insurance, microfinance, private equity, mortgage and FBN BANK (UK) LIMITeD pension fund custodian services – making it one of the PARIs BRANCH most diversified financial conglomerates on the continent. FIRsT FIRsT FBN LIFe FIRsT FIRsT FBN FIRsT FBN FBN FBN FIRsTBANK FIRsTBANK ReGIsTRARs INsURANCe AssURANCe FUNDs TRUsTees MORTGAGes PeNsION CAPITAL BUReAU De MICROFINANCe South Africa China BROKeRs CUsTODIAN CHANGe BANK (Rep. Office) (Rep. Office) FBN seCURITIes Geographical presence Products and services BeIJING As a full-spectrum financial services provider our LONDON product/service mix has been designed to cater to PARIs the needs of our diverse client base. Increasingly strong on services delivered via various electronic platforms, our primary concern is to improve customer transaction convenience and ease of access to our services, as well as strengthen transaction security. LAGOs MARKeT JOHANNesBURG CAPITALIsATION N448.04 billion strategic approach VISION Be THe CLeAR LeADeR AND NIGeRIA’s BANK OF FIRsT CHOICe MISSION TO ReMAIN TRUe TO OUR NAMe BY PROVIDING THe BesT FINANCIAL seRVICes POssIBLe GROUP STRATEGIC PRIORITIES Business line expansion International expansion Restructuring for growth Sequencing growth Focusing core banking Continuing modest expansion Restructuring the Group’s systematically on profitable growth and in the deployment of operating model to optimally Structurally and efficiently the Group on strong international representative drive its strategy with precise sequencing growth initiatives growth businesses. offices to major strategic management oversight and priorities over the finance/trade hubs. and governance. planning horizon. BANK STRATEGIC PRIORITIES Growth Service excellence Performance management Talent management Attaining full benefits of scale Driving unparalleled service Delivering unmatched results Becoming a hub for the best and scope by accelerating levels by developing world- by creating a performance industry talent; cultivating a growth and diversification of class institutional processes, culture with clear individual highly motivated, capable and assets, revenues and profit. systems and capabilities. accountability at all levels. entrepreneurial workforce.
www.firstbanknigeria.com/annualreport/2010/ First Bank of Nigeria Plc Annual Report & Accounts 2010 3 Credit ratings INTRODUCTION Report National International Outlook date LONG TeRM sHORT TeRM LONG TeRM sHORT TeRMstandard & Poor’s1 August 2010 ngA ngA-1 B+ B NegativeFitch1 October 2010 A+ F1 B+ B StableGCR1 August 2010 AA- A1+ -Agusto & Co2 October 2010 A+ Stable1 This is a Group and Bank rating. BUsINess ReVIeW2 This is a Bank only rating. strategic Business Units In its quest to become the ‘clear leader and Nigeria’s bank of first choice’, the Bank has identified a need to move away from the generalist/geographic market orientation to more competitive customer-centric market-facing business units focused on specific market segments. This strategy will enable us to gain deeper insights into our customers’ specific needs and deliver the right products to the right types of customers at the expected levels of service. The strategy should give us a greater share of the client’s mind and wallet, and ensure we remain leaders in our very dynamic market. RIsK MANAGeMeNT AND GOVeRNANCe For more detailed information about our new structure, which commenced in October 2010, see pages 46 to 56. BUsINess NeT1, 2 % OF DePOsIT2 % OF LAD3 NUMBeR OF ACTIVITY ReVeNUe ACCOUNTs N’mn AT THe eND OF 2010 Corporate Midsize and large 15,818 Over Banking corporate clients 3,600 with key man risk see page 48 sTATeMeNTs FINANCIAL Public Federal and State 15,905 Over sector establishments 1,500 North Banking Over see page 50 2,000 South North South North South Retail Mass retail as well 70,826 Over Banking as small businesses 1.4 mn North see page 52 Over INFORMATION 4 mn South COMPANY North South North South Institutional Multinationals and 24,036 Over large corporate Banking clients 1,900 see page 56 Treasury Treasury and 34,894 NA NA NA corporate related sHAReHOLDeR INFORMATION activities Private High net worth Not operational NA4 NA4 NA4 Banking individuals see page 54 1 Net revenue = net interest income + net fee and commission income + other income. 2 Based on data generated in the last quarter of 2010. 3 Loans and advances. 4 Newly created business unit, officially commenced in October 2010.
4 INTRODUCTION First Bank of Nigeria Plc Annual Report & Accounts 2010 FINANCIAL HIGHLIGHTs FOR THE yEAR ENDED 31 DECEMBER 2010 GROUP BANK TOTAL ASSETS (N‘bn) 2,305 GROUP 2,174 2,010 N2,305 billion (USD15,506 million) 1,957 2010: 1,772 1,667 2009: N2,174 billion (USD14,729 million) 1,528 1,165 BANK 911 763 2010: N1,957 billion (USD13,165 million) 2009: N1,772 billion (USD12,009 million) Mar 07 Mar 08 Mar 09 Dec 09 Dec 10 GROSS EARNINGS (N‘bn) 231 GROUP 218 208 N231 billion (USD1,551 million) 194 2010: 185 175 2009: N194 billion (USD1,314 million) 156 131 BANK 91 79 2010: N208 billion (USD1,396 million) 2009: N175 billion (USD1,188 million) Mar 07 Mar 08 Mar 09 Dec 09 Dec 10 DEPOSIT LIABILITIES (N‘bn) 1,451 GROUP 1,347 1,331 1,244 N1,451 billion (USD9,757 million) 1,194 2010: 1,072 2009: N1,347 billion (USD9,123 million) 700 662 BANK 600 582 2010: N1,331 billion (USD8,951 million) 2009: N1,244 billion (USD8,428 million) Mar 07 Mar 08 Mar 09 Dec 09 Dec 10 PROFIT BEFORE TAXATION (N‘bn) GROUP 84 2010: N43 billion (USD290 million) 2009: N13 billion (USD90 million) 46 46 43 BANK 38 34 N34 billion (USD226 million) 28 2010: 13 22 8 2009: N8 billion (USD52 million) Mar 07 Mar 08 Mar 09 Dec 09 Dec 10 Note: Exchange rate as at December 2010: 1 US Dollar (USD) = 148.67 Nigerian Naira (December 2009: 1 US Dollar (USD) = 147.6 Nigerian Naira).
www.firstbanknigeria.com/annualreport/2010/ First Bank of Nigeria Plc Annual Report & Accounts 2010 5 The Group The Bank INTRODUCTION 12 months to Dec 2010 9 months to Dec 2009 12 months to 9 months to Dec 2010 Dec 2009 MAJOR BALANCe sHeeT ITeMs N million UsD million N million UsD million N million N million Total assets and contingencies 3,328,208 22,387 3,146,659 21,319 2,291,384 2,203,772 Total assets 2,305,258 15,506 2,174,058 14,729 1,957,258 1,772,456 Loans and advances 1,143,614 7,692 1,078,452 7,307 1,017,411 1,022,486 Deposit liabilities 1,450,567 9,757 1,346,573 9,123 1,330,771 1,244,030 BUsINess ReVIeW Share capital 16,316 110 14,504 98 16,316 14,504 Shareholders’ funds 340,626 2,291 311,270 2,109 340,735 317,488 MAJOR PROFIT AND LOss ACCOUNT ITeMs N million UsD million N million UsD million N million N million Gross earnings 230,606 1,551 193,966 1,314 207,524 175,390 Charge for doubtful accounts (21,590) (145) (40,624) (275) (22,596) (41,462) Profit before exceptional item and taxation 41,299 278 13,297 90 31,491 7,689 Exceptional item 1,889 13 - - 2,046 - RIsK MANAGeMeNT AND GOVeRNANCe Profit after exceptional item before taxation 43,188 290 13,297 90 33,537 7,689 Taxation (9,777) (66) (8,396) (57) (6,601) (6,414) Profit after taxation 33,411 225 4,901 33 26,936 1,275 DIVIDeND N million UsD million N million Declared 2,900 20 2,900 INFORMATION PeR 50K sTATeMeNTs ORDINARY sHARe FINANCIAL eARNINGs (BAsIC) N N N N Basic 1.02 0.17 0.83 0.04 Adjusted 1.02 0.17 0.83 0.04 Net assets 10.44 10.73 10.44 10.94 Total assets – actual 70.64 74.95 59.98 61.10 INFORMATION – adjusted - - - - COMPANY Stock Exchange quotation 13.73 14.05 RATIOs % % % % Cost to income 65.5 59.20 66.50 58.80 Return on average assets 1.49 0.23 1.44 0.07 Return on shareholders’ funds 9.81 1.57 7.9 0.40 Capital adequacy 20.35 15.80 27.57 21.33 sHAReHOLDeR INFORMATION Number of branches/agencies and subsidiaries 652 610 611 570 Number of staff 8,154 8,757 7,603 8,221 Number of shares in issue (million) 32,632 29,008 32,632 29,008
6 INTRODUCTION First Bank of Nigeria Plc Annual Report & Accounts 2010 CHAIRMAN’s sTATeMeNT Fellow shareholders, invited guests, gentlemen of the press, distinguished ladies and gentlemen, I am pleased to welcome you to the 42nd Annual General Meeting of First Bank of Nigeria Plc. I feel especially honoured by the decision of the Board of Directors of FirstBank to confer on me the responsibility of chairing the Board of this venerable institution. Tasking though this assignment is bound to be, in the increasingly competitive landscape that the financial services industry in Nigeria has become, I am confident of my ability to lead the Board to meet emerging challenges head on. In a sense, I have had a very robust engagement with our Bank’s governance structures. And I cannot but thank the immediate former Chairman, Dr Oba Otudeko, primarily, for the rigour of his work ethics, and the sheer breadth and depth of his vision; and then, for his willingness to share these with his colleagues on the Board. “I feel especially honoured by the decision of As one who was until recently, a Non-Executive Director on the Board of Directors of FirstBank to confer on the Board, I make bold to say that the new team shall be me the responsibility of chairing the Board of this proceeding within the strategic markers which the Board venerable institution.” has committed to. The task ahead will require all the capacity available to the Bank, including that which the body of shareholders has been noted for giving. While counting on your support, I wish to assure you, on behalf of the Board of Directors, management, and staff of our Bank, of our commitment to grow shareholder value. Thank you yours sincerely Prince Ajibola Afonja Chairman April 2011
www.firstbanknigeria.com/annualreport/2010/ First Bank of Nigeria Plc Annual Report & Accounts 2010 7FORMeR CHAIRMAN’s sTATeMeNTTwelve months ago, I enunciated my vision for the Bank toyou; and I am delighted to report that over the last financialyear, we have had this vision validated by all the main INTRODUCTIONassessment indices. On the whole, the period for whichI report witnessed a generally positive trend in industrynumbers. The Central Bank of Nigeria (CBN) similarlymade appreciable progress in its efforts at reforming andrepairing the banking sector of the economy, as part ofa process of reinvigorating the financial intermediationfunction, and improving the resilience of the domesticeconomy to potential shocks.One of the more important reforms embarked upon bythe apex bank was the decision to enforce the provision BUsINess ReVIeWof the Code of Corporate Governance for Banks, whichlimits the tenure of Non-Executive Directors. Consistentwith the provisions of this code, and consonant with ourlong-standing commitment to best-of-breed corporategovernance practice, especially our commitment tocontinuity and a constant rejuvenation of the Board of “Undoubtedly, further policy changes over theDirectors, we undertook changes to the Board in the medium term, including the prospects of enhancedreporting period. In consequence of these changes,effective 31 December 2010, I voluntarily retired from the competition, either from a consolidation of industryBoard of FirstBank. operators or from the entrance of foreign players, would challenge our resources. However, the goal RIsK MANAGeMeNT AND GOVeRNANCeAs you welcome the new members of the Board, I amsure that you will accord them the unstinting support, remains to be the bank of first choice for the domesticwhich the Board has always enjoyed from its shareholders. market, and indeed the rest of Africa.”I should also thank you, at this point, for everything.Strong though FirstBank’s corporate governance practiceis: the external environment within which the Board had Favourable external conditions, helped in large part byto work was just as important for our success. I cannot continued growth in China’s demand for basic resources,ignore your contribution to this salutary environment. played to the advantage of the domestic economy.On this understanding, your support to the incoming Nonetheless, local sources, including agriculture and theBoard is especially necessary, as the industry’s regulatory wholesale and retail trade sector, were the main motorsenvironment and its structure continue to change in of domestic output growth. Although concerns remained over the sluggish domestic market for credit, the financial sTATeMeNTsresponse to recent global events. In the constitution of FINANCIALthe new Board, we have ensured a mix of competence services industry began to show signs of recovery inconsistent with our understanding of the challenges that the review period, with most banks expected to turn inwe will face in the short to medium term. We have also positive profitability figures this year. While recognisingbalanced the need to rejuvenate the Board, with a strong the invaluable role played by the intervention of the Assetbias for continuity. In the person of the new Chairman, Management Company of Nigeria (AMCON) in trying toPrince Ajibola Afonja, this mix of continuity and change is sanitise the domestic industry’s portfolio of non-performingembodied. His previous stint as a Non-Executive Director loans, further reforms by the CBN to the industry will beof the Bank ensures he has a proper handle on our needed to consolidate the current growth spurt. INFORMATIONstrategic growth opportunities and the themes that back Other regulators in the financial services space also COMPANYthese. As the new Chairman, he brings to his new office undertook broad repairs in their industries. These effortsalmost 50 years of varied experience in both the private ranged from reducing the cost of bond issuance andand public sectors and invariably reaching the top of his improving corporate governance practices (Securities andchosen career in all of these assignments. I have no doubt Exchange Commission and the Nigerian Stock Exchange),that he will use these competences to the full benefit of recapitalisation of industry operations (National Insurancethe Bank, and I enjoin your unalloyed support for him and Commission), and new asset allocation standards (Pensionhis team. Commission of Nigeria). In recognition of the rapidlyThe fortunes of the global economy were ambivalent eroding boundaries between sub-sectors in the financialin the review period, with emerging market economies, services industry, these different regulators increased sHAReHOLDeR INFORMATIONespecially China and India, dominating growth. Tepid coordination in the review period.growth in the advanced economies remained a cause forconcern. Anxieties over a possible contraction of globalgrowth were exacerbated by an uncritical recourse to CONSOLIDATING OUR ChANGEfiscal consolidation in a number of globally important AGENDAeconomies, and fear of competitive currency devaluations, The review period represented the tail end of one ofas countries tried to address their current account the most temperamental risk cycles that the financialimbalances. In both the Euro area and the UK the banking services industry in this country has been through. Forindustry came under additional pressure with authorities most industry players, 2010 represented an opportunityin both jurisdictions proposing a tax on bank profits. to consolidate following the unprecedented levels of loan
8 INTRODUCTION | FORMER CHAIRMAN’S STATEMENT First Bank of Nigeria Plc Annual Report & Accounts 2010 loss provisions in 2009; and a number of banks made Automated processes, customisable/interactive customer considerable headway in the pursuit of bad debts. The interfaces, including ATMs and the internet, all provide markets responded to the general credit squeeze through the scale and modular features that today’s market needs. a heightened influx of credit applications to the Bank. We These functionalities are most cost-effective when they are responded to this by keeping our exposure to the public built around a public infrastructure base. Otherwise, they sector unchanged within our internal portfolio limit, while portend enormous cost outlays for the industry looking focusing on growth to the real sector. Consequently, the ahead. We must acknowledge in this regard, the effort of adverse impact of the cost of cleaning up our loan books the CBN to get the industry to share a lot more resources, and improving the quality of our risk assets on our profit both as a solution to potential hikes in operating expenses, figures was more muted in the review period than was and as a process through which industry operatives are the case last year. We ended the year in full compliance able to ease and improve service delivery options. with regulatory requirements for managing our portfolio. Consequently, as part of the process of transforming the Leveraging the many lessons of the last couple of years, service delivery experience in the review period, we: we strengthened our monitoring capabilities in order to ensure the integrity of our risk assets portfolio and • mplemented a framework that enables collection, i mitigate the possibility of a recurrence, going forward. resolution and future prevention of various customer issues; The capacity for early recognition should improve our ability to deploy remedial action ahead of the classification • mplemented a mobile banking solution designed to i of risk assets. By increasing the weights attached to address the issues raised by financial exclusion and performing accounts in the assessment of our relationship mainstreaming the large unbanked segments of the management personnel, we are assured of a proactive and domestic population; more profitable management of our loan book. • ptimised branch operations by centralising non- o At another level, the relative successes notched up in customer-facing/transactional processes and the review period happened within the broad strategic redesigning/automating the remaining processes with context laid out in my address to our branches; you last year. In the review period, “...we reaped further gains • ransformed the branch experience by ensuring all t we reaped further gains from the elements are in line with service delivery expectations; from the ongoing ongoing optimisation of our Group structure. We were convinced of the • ptimised our manning structure, empowering staff o optimisation of our Group and aligning our front-line personnel with our service cost savings and synergies obtainable governance structure... the from combining previously discrete delivery mandate; and but conceptually related subsidiaries • ptimised costs and increased customer satisfaction by o holding company structure under one roof. At the Group level, the ensuring alternative channels work. remains our preference holding company structure remains Human resource issues remained at the centre of the our preference in complying with the in complying with the CBN’s CBN’s requirements associated with change effort in the review period. Evidence from the uneventful take-off of our new operating model attest to requirements associated the repeal of the universal banking the correctness of the many initiatives we undertook in structure. Accordingly, the Bank with the repeal of decided on obtaining an international respect of our staff in the review period. Among others, these included: the universal banking banking licence from the CBN, while simultaneously creating a holding • staff rejuvenation and corporate workforce renewal; structure...” company, which will be the only • he selection and design of training interventions in t Former Chairman listed entity in what was previously support of the Bank’s strategic aspirations; the FirstBank Group. We have since submitted our compliance plan to the CBN and are awaiting • edesign of our incentive structure to take cognisance r its response. However, there are a number of concerns with of the changes to our operating structure, and to this option, including the resolution of double taxation, incentivise the different performance levels needed for which our tax consultants are currently working on. staff to excel both in the front office roles and support functions; and The commitment to inorganically grow our domestic and international footprints was strengthened in the review • ommencement of in-house e-learning courses c period, as we made considerable advances with respect to focused on product, banking, information technology a couple of potential acquisitions. While we look forward and credit administration. to more concrete developments regarding our strategic These changes would reinforce both our medium- growth opportunity prospects in the coming quarters, it term goals and our success trajectory. Undoubtedly, is worth noting that our representative offices generated further policy changes over the medium term, including new business opportunities/referrals in the review period. the prospects of enhanced competition, either from a The Bank also pursued changes to its operating structure consolidation of industry operators or from the entrance that were necessary in order to realise its new vision. A of foreign players, would challenge the Bank’s resources. much more customer-centric front office, and back- However, the goal remains to be the bank of first choice end processes that can be reconfigured according to for the domestic market, and indeed for the rest of Africa. the front office’s definition of what should be done in order to better serve the market are the non-negotiable deliverables expected from these process changes. As OUR PERFORMANCE change becomes a permanent feature of the financial Our Performance Constraints in our operating services industry’s landscape, the service challenge goes environment, which have been on since the global beyond anticipating and meeting rapidly changing recession set in and which seem to have evolved yearly, customer tastes. Even the way we are structured as a reflected on our performance through a 19% drop in business is increasingly susceptible to sharp inflections in interest income. On account of this, despite a 33% the customer fashion trajectory. increase in non-interest income, group gross earnings,
www.firstbanknigeria.com/annualreport/2010/ First Bank of Nigeria Plc Annual Report & Accounts 2010 9when compared to annualised figures for 2009, declined (b) Also, at its meeting of 29 December 2010, the Boardby 11% from N194 billion recorded in the nine months appointed Mallam Ibrahim Waziri, Mrs Khadijahto December 2009, to N231 billion in the 12 months to Alao-Straub, Mr Obafemi Otudeko and Mr TundeDecember 2010. Hassan-Odukale as Non-Executive Directors to fill the casual vacancies occasioned by the resignationRelative to last year, we were able to increase Group profit of four Non-Executive Directors, while Mallam Bellobefore tax from N13.3 billion (revised) in the nine months Maccido was appointed as Executive Director to fillto end December 2009 to N43.2 billion after charging the vacancy created by the resignation of Dr yerimathe 1% general loan loss provision of N11.4 billion in the Ngama from the Board. The appointments tookreview period. After tax Group profit rose by 411% from INTRODUCTION effect from 1 January 2011.N4.9 billion (revised) in the nine months to December2009 to N33.4 billion in the 12 months to December (c) Consequent upon the resignation as a Non-2010. The Bank’s profit rose by 1,484% to N26.9 billion, Executive Director and Chairman of the Bank,from N1.2 billion over the same period. the Board at its meeting of 29 December 2010 appointed Prince Ajibola Afonja as the Chairman ofRed flags were raised in the review period, as declining the Bank with effect from 1 January 2011.yields on loan books drove a significant decline in interestincome. Average yields on our loan book may remain 3 Retirement by rotationsubdued as structural impediments of a macroeconomicvariety may continue to restrict growth in private demand In accordance with the Company’s Articles of Association, the following Directors, Mr Bisi Onasanya, Mrs Remi BUsINess ReVIeWfor credit. Although we were able to drive all interestexpenses down through a shift in our deposit mix, Odunlami and Alhaji Mahey Rasheed, OFR would retireanticipated increases in rates across the board in response by rotation and, being eligible, offer themselves for re-to the apex bank’s tightening of monetary conditions may election. Mr Ambrose Feese, Mrs Ibukun Awosika, Mrfurther complicate the recovery in credit markets. Ebenezer Jolaoso, Alhaji Lawal Ibrahim, Mallam Ibrahim Waziri, Mrs Khadijah Alao-Straub, Mr Obafemi OtudekoThe effect of lower yields and rising costs showed up in and Mr Tunde Hassan-Odukale, Directors appointed sinceworsening cost-to-income ratio, which deteriorated from the last Annual General Meeting, would offer themselves59.2% to 65.5%. The Group and the Bank achieved a for election as Non-Executive Directors. Mallam Bellototal capital adequacy ratio of 20.35% and 27.57% Maccido, an Executive Director who was appointed sincerespectively in the period under review, well in excess the last Annual General Meeting, would also offer himselfof the regulatory minimum of 10%. Clear evidence of RIsK MANAGeMeNT for election as a Director. AND GOVeRNANCeimprovements in our Key Performance Indicators confirmsour commitment to return value to shareholders on asustainable basis. APPRECIATIONIn conjunction with earlier outlined growth initiatives, I am As I come to the end of a most educative and interestingconvinced that FirstBank will continue to deliver value for tenure on the Board of Directors of one of Nigeria’s flagshipmoney in the long run. quoted companies, I wish to express my heartfelt gratitude to you, distinguished shareholders of FirstBank. It has been a long association, first as a Non-Executive Director, andBOARD ChANGES then as Chairman. For the most part, this association hasThe following changes took place on the Board during the traversed key points of inflection in the modern historyfinancial year ended 31 December 2010: of the financial services industry; and some of these were sTATeMeNTs FINANCIAL particularly trying times. I can assure you that none of the1 Resignations many achievements that we boast of today could have (a) Mrs Bola Adesola, Mr Oladele Oyelola, Dr Abdu been achieved without your understanding and support. Abubakar, all Executive Directors, resigned their I wish also to thank the Board of Directors, management appointments from the Board with effect from and staff for the broad perspectives they brought to bear Thursday 15 July 2010. on the debates that informed our policy choices, and the Dr yerima Ngama, also an Executive Director, single-minded zeal with which implementation of these resigned from the Board effective Friday choices were pursued once we had agreed on the different INFORMATION 31 December 2010. dimensions of what we had to do. COMPANY (b) In compliance with the Central Bank of Nigeria I have no doubt that the structures we have put in place (CBN) Code of Corporate Governance, which are more than adequate for the challenges ahead of the stipulates a maximum of 12 years as the tenure of Bank. I also believe that our Bank has the resources and Non-Executive Directors on the Board of banks, the the will to implement the needed initiatives. following Non-Executive Directors resigned their appointments from the Board with effect from yours sincerely Friday 31 December 2010: (i) Dr Oba Otudeko, OFR; sHAReHOLDeR INFORMATION (ii) Alhaji Abdullahi Mahmoud; (iii) Lt General Garba Duba (Rtd); and (iv) Mr Oye Hassan-Odukale, MFR.2 Appointments Dr Oba Otudeko, OFR (a) The Board’s meeting of 28 October 2010 appointed Former Chairman Mr Ambrose Feese, Mrs Ibukun Awosika, April 2011 Mr Ebenezer Jolaoso and Alhaji Lawal Ibrahim as Non-Executive Directors.
10 INTRODUCTION First Bank of Nigeria Plc Annual Report & Accounts 2010 BANK STRATEGIC PRIORITIES QUICK READ GROWTH Relationship to strategy strategic priority areas Fundamental to our vision of being the lender and To maintain our position as the leading bank, bank of first choice. we continue to push on all fronts including p38 organic and inorganic growth in our core business as well as international expansion. Rapid development of the Our growth agenda is nonetheless structured Nigerian financial services with shifting emphases over time and with a market creates a ‘grow view to sustainable earnings growth. or become irrelevant’ imperative. Organic growth Scale confers significant benefits (cost efficiencies, Organic growth remains our core means of ensuring sustainable deal flow, convenience growth. The focus of our growth strategy is around six cross-cutting themes – key segment penetration, cross-selling, value proposition to customers, etc.) in enhancement, price optimisation, stimulating customer usage and commercial banking. channel optimisation. Achievements Growth emphasis to shift • eorganised commercial division around market segments (Corporate, R from balance sheet to Public Sector, Retail, Institutional and Private Banking) and in process enhanced profitability. of value proposition overhaul • ade significant headway in priority industries and segments M (e.g., landmark telecoms transactions, structured lending) p32 • e-priced deposit liabilities leading to significant reduction in cost R Read more about our strategy of funds • treamlined product portfolio on the heels of detailed consumer S insights work • ade significant headway with respect to future use of alternate channels M to generate revenue (e.g., mobile money offering planning/development) • eveloped aligned go-to-market approach for wealth management D offerings between the Bank, its UK subsidiary and its investment banking arm. 2011 priorities • rive execution of the new Strategic Business Unit strategies D • nstitutionalise cross-selling initiatives across our network supported by I appropriate transfer pricing/incentives mechanisms • trengthen our franchise in priority industry and market segments S (e.g., affluent and SME segments in retail) • mplement updated risk-based pricing framework across Strategic I Business Units • apidly deploy and grow mobile money. R
www.firstbanknigeria.com/annualreport/2010/ First Bank of Nigeria Plc Annual Report & Accounts 2010 11Growth remains a fundamental priority. This will be achieved either inorganicallyat the right price, where a strong case for synergy creates value to shareholders,by accelerating our sustainable (organic) growth initiatives or via a combinationof both. INTRODUCTION BUsINess ReVIeW Objectives Our broad objective is to achieve growth and transformation, while defending Inorganic growth our leadership position and extending We continue to believe that opportunities exist within the Nigerian it across key dimensions (customers, financial services landscape for further consolidation. We are brand, service, etc.) to deliver superior/ committed to exploring opportunities that will create significant sustainable financial results. value for our shareholders via a complementary combination, on RIsK MANAGeMeNT AND GOVeRNANCe the right terms. shareholder value creation remains our paramount consideration in any transaction. “...strategic growth opportunities International expansion identified will depend on As the largest private sector financial institution in sub-saharan Africa (ssA) (ex-south Africa), we believe we are optimally poised to lead being able to deliver what the financial services growth in key ssA markets and in relevant markets customers want, when they want beyond. Our initial focus has been the expansion of locations outside Africa that complement our existing business in Nigeria – particularly it, where they want it, in the right supporting trade finance and cross-border lending and investments. Increasingly, we will focus on a select number of ssA markets that quantities and the right quality, sTATeMeNTs FINANCIAL we believe to be of disproportionate importance. while keeping cost competitive...” Achievements • eveloped framework for international expansion with detailed analysis D Bisi Onasanya of target countries, entry strategy, roll-out requirements and prioritisation Group Managing Director/ • aunched the FirstBank Beijing representative office, significantly boosting L Chief Executive Officer access to cross-border trade and investment flows for the Bank. Priorities (medium/long term) • stablish representative office in United Arab Emirates E INFORMATION COMPANY • ake initial foray into Sub-Saharan Africa (outside Nigeria) in line with M articulated strategy and balanced against competing funding priorities (e.g., domestic (Mergers & Acquisitions)). sHAReHOLDeR INFORMATION
12 INTRODUCTION First Bank of Nigeria Plc Annual Report & Accounts 2010 BANK STRATEGIC PRIORITIES QUICK READ seRVICe DeLIVeRY AND OPeRATIONAL eXCeLLeNCe Relationship to strategy Initiatives for transforming service delivery Enabler to drive profitable growth (scale up efficiently). We are pursuing five key initiatives to transform our service delivery based on customer feedback p40 and our competitive environment. Lever for improving profitability (cost efficiency). Customer experience/issue resolution Be the ‘clear leader’ and Bank of ‘first choice’ Continuously identify and resolve customer issues, monitor (increase number of customer experience, and prioritise improvements based on customer feedback. customers, deepen existing relationships). Centralised processing and branch process re-engineering p32 Centralise transactional processes and optimise branch processes to drive standardisation, reduce transaction processing times and Read more about our strategy decongest the branches. Brand optimisation Operational excellence drivers Improve our branch ambience, increase awareness of our products and services, and encourage customer migration to alternative channels. Manning/frontline transformation service delivery Optimise our manning structure and levels, empower staff and ensure our service objectives are translated through our front-line staff. Cost Process Channel optimisation and migration optimisation excellence Optimise channels (performance and functionality) and migrate customers to the appropriate channel (based on segment needs and requirements). 90% ATM uptime, increased from 52%
www.firstbanknigeria.com/annualreport/2010/ First Bank of Nigeria Plc Annual Report & Accounts 2010 13Our push for growth is underpinned by an intensive focus to provide excellentservice in an efficient manner to our customers. To achieve this, our servicedelivery and operational excellence transformation is focused on three interlinkedthemes – service quality, cost optimisation and process excellence – with service INTRODUCTIONquality being the primary lens, in order to ensure all initiatives drive impact at thefront line. BUsINess ReVIeW Initiatives for operational excellence Objectives Increase our service quality by focusing on We are streamlining our operations and optimising what is most important to customers and our costs by focusing on the four biggest p41 delivering it in an efficient and effective opportunity areas – quick-wins, manning, expense manner (e.g., shorter processing times, control and depreciation/maintenance spend. increased convenience). Increase efficiency and effectiveness by RIsK MANAGeMeNT Quick-wins AND GOVeRNANCe continuous root-cause identification and Analyse quick-win cost optimisation opportunities and estimate elimination of waste and income leakages. expected impact from successful implementation. Enable continuous improvement and Manning structure increase enterprise ability to respond to changing requirements (both internal Align manning levels and manning approach at both the branch and and external) through ongoing end-to- head office levels to ongoing structural changes, and identify ways end business process re-engineering. to improve our operating efficiency and provide more satisfying jobs for our staff. sTATeMeNTs FINANCIAL expense control Review current expense control policies and procedures, and identify opportunities for improvement, especially for controllable costs. Developing, monitoring and tracking tools to ensure compliance and provide new expense policy framework recommendations. INFORMATION Depreciation/maintenance COMPANY Review ‘big-ticket’ maintenance items and identify areas where we can eliminate and/or optimise our maintenance spend. Drive further efficiencies in our procurement process, policies and guidelines. sHAReHOLDeR INFORMATION78% 85%reduction in account ATM migration rate foropening time when ‘re-branded branches’,using the centralised increased from 62%processing centre**It now takes approximately 10 minutes to have an account opened.
14 INTRODUCTION First Bank of Nigeria Plc Annual Report & Accounts 2010 BANK STRATEGIC PRIORITIES QUICK READ PeRFORMANCe MANAGeMeNT Relationship to strategy Initiatives for performance management/ productivity improvement Based on the Bank’s aspirations with respect Creating a work environment in which to performance, ‘Deliver employees are productive is essential for p42 unmatched results by organisational success. It is against this creating a performance backdrop that our performance management/productivity culture with clear individual improvement initiatives were established. Our key focus was accountability at all on motivation and providing an enabling environment to levels’, our performance improve performance and quality of life. Some of the major management framework is milestones achieved include: focused on the provision of support drivers to create a Pay for Performance and Pay for Role healthy performance-driven environment that ensures Pay for Performance is a payout incentive to reward higher that staff are appropriately performance. Pay for Role is a payment incentive for back measured, evaluated and office function. rewarded. Adjustment of notches/special notches p32 Adjustment to higher amounts of notches on base pay to serve as Read more about our strategy a motivator when staff are not promoted. Automation/standardisation of Human Capital Management Development (HCMD) processes established systems and IT driven processes through the People First Management system (PFMs). N1.2 billion 1,638 staff was expended as Pay for were promoted in 2009, Performance to incentivise out of 7,735 appraised, contribution and retain as against 1,645 staff superior performers – this promoted out of 7,754 incentive contribution appraised in 2008/2009, commenced in 2010 an average of about 21% in both years
www.firstbanknigeria.com/annualreport/2010/ First Bank of Nigeria Plc Annual Report & Accounts 2010 15In 2010, we sought to establish meaningful performance standards andexcellence, while ensuring that staff were appropriately measured andevaluated. In essence, we worked towards establishing an environment wherethere is no place to hide poor performers. In this regard, we instituted initiatives INTRODUCTIONto drive performance, details of which will be given in subsequent sections.In addition, we worked towards developing employee potentials whichwill serve to systematically attract and retain core talent in alignment withcorporate strategy. BUsINess ReVIeW Objectives To ensure an appropriate performance management system that will actualise employee health and wellbeing the organisation’s strategy and shared established a framework to raise consciousness of health issues values to reinforce the Bank’s stance particularly with the shift in emphasis from curative medicine to as a performance and merit-driven preventive health. organisation. RIsK MANAGeMeNT AND GOVeRNANCe Remedial management To ensure that human resources initiatives embarked upon will encourage optimal established a periodic review framework of our appraisal system to performance of employees. achieve and maintain a high-performing workforce. Review and establishment of new scorecards “As the labour market becomes Reviewed the scorecards of various functions Bank-wide with a view to ensuring that each unit in the Bank has objective and more dynamic, employees’ measurable Key Performance Indicators (KPIs). awareness of their rights is sTATeMeNTs FINANCIAL increasing. Therefore, we regularly Quarterly performance evaluation refine our HR practices with respect Designed to give feedback on staff’s performance on a quarterly basis. to performance management and employee development.” Ayodele Jaiyesimi INFORMATION Head, Human Capital Management COMPANY & DevelopmentN75,500was the average sHAReHOLDeR INFORMATIONmedical spend perstaff member in 2010as against N68,431in 2009
16 INTRODUCTION First Bank of Nigeria Plc Annual Report & Accounts 2010 BANK STRATEGIC PRIORITIES QUICK READ TALeNT MANAGeMeNT Relationship to strategy Initiatives for people transformation and talent management The crafting of the talent management framework In line with the Bank’s strategic intent, while is predicated on the Bank’s drilling down to the Strategic Business Units’ p44 overall strategy, which objectives, effective talent management within two reviews still re- practices are a top priority for HCMD to enable the Bank to echoes the need to become maintain a competitive advantage and optimise returns on a hub for the best industry human assets. As a result we identified the need for broader talent, cultivating a highly skills, strong leadership capabilities, role models and business motivated, capable and needs that require innovative and entrepreneurial skills. entrepreneurial workforce. With this in mind, we embarked on a number of initiatives to Essentially our talent achieve these objectives. management initiatives are geared towards enabling FirstLearn a quality workforce to maintain competitive An online platform conceived to encourage self-learning advantage, meet business and development. demands and deliver on strategic aspirations. Capacity building Training intervention based on job competency requirements, p32 business needs and evolving business opportunities. Read more about our strategy Management development programmes Training intervention targeted at management staff to equip them for the challenges of current and future roles. 1,200 staff 703 enrolled for information programmes security courses were run in 2010 as against 602 programmes run in 2009, a 16.78% increase