Fitch Ratings has affirmed the Long-Term Issuer Default Ratings (IDRs) of FBN Holdings Plc (FBNH) and its subsidiary, First Bank of Nigeria Ltd (FIrstBank), at ‘B-’ with a Negative Outlook.
In a statement announcing this decision, the global rating agency said: “The affirmation reflects our view that the impact of the Central Bank of Nigeria’s (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.
“On 29 April 2021, the CBN removed the non-executive directors on the boards of FBNH and FBN -a domestic systemically important bank- and replaced them with its own appointees.
The CBN says its actions were in the interest of financial stability and minority shareholders. It says it acted because FBN had made significant executive management changes, including replacing the CEO, without prior notice or approval of the regulator. The CBN also highlighted corporate governance failings pertaining to long-standing and problematic related-party exposures, and failure to comply with regulatory directives.
“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.”