Fitch affirms First Bank at B-, says board replacement won’t affect profitability, asset quality

Fitch, an international credit rating agency, has affirmed FBN Holdings Plc (FBNH) and its primary operating subsidiary, First Bank of Nigeria Ltd (FBN), at “B-” with a negative outlook.

A ‘B’ rating indicate that “material default risk is present, but a limited margin of safety remains.”

This development comes days after the Central Bank of Nigeria (CBN) sanctioned the tier-1 lender over its management decision to end the tenure of Adesola Adeduntan as the bank’s managing director.

First Bank had announced the appointment of Gbenga Shobo as its new managing director and chief executive officer with effect from April 28.

But the CBN rejected the move by the bank’s board of directors.

CBN argued that the tenure of Adeduntan was yet to expire, adding that it is not aware of any report from the board indicting the managing director of any wrong-doing or misconduct.

In a statement released on Friday, Fitch said the “impact of the CBN replacement of FBNH and FBN’s boards, the identification of corporate governance failings and the imposition of corrective measures are tolerable at the rating level.”

“We have assessed the near-term financial impact of these actions on FBNH and FBN and believe this is tolerable at the rating level, even though the final outcome is uncertain. In our view, any remedial actions imposed by the CBN, including a potential reclassification of related-party exposures as impaired, will not have a material effect on the group’s asset quality, profitability and capitalisation.

“However, this does not consider any possible additional actions by the CBN, especially if FBN fails to implement the regulator’s corrective measures or if there were any further uncovering of corporate governance irregularities.

“The Outlook remains Negative, reflecting FBNH’s pre-existing asset quality and capitalisation weaknesses as well as the group’s corporate governance weaknesses highlighted by the CBN. These could put pressure on the ratings.”