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Firstbank’s NPL Improvements Restores Investors’ Confidence

The recent turnaround and improvement in the Non-performing loans of First Bank of Nigeria Limited (FirstBank) have been a major boost in the Bank’s quest to reinforce its leadership of the financial services industry in Nigeria.

The current leadership of its Chief Executive Officer, Dr Adesola Adeduntan have been instrumental in building stakeholders’ confidence and trust in the Bank’s financial viability with analysts left to ponder and perhaps, understudy the pace such feat has been achieved.

Well, FirstBank provides quality answers to these stakeholder’s questions by its consistent improvements in its Non-performing Loans (NPL) ratio and position.

The Bank has made a profit of N38.1 billion at the Half-year 2021, rising 6.9% from N35.6 billion last period, year on year.

Non-performing loans are critical to any bank’s operations, the management of which could easily make or mar. After the first quarter of 2020, FBN’s non-performing loans ratio stood at 9.2%.

By June 2020, improvements were noted, the NPL ratio stood at 8.8%. By March 2021, this figure had impressively dwindled to 7.9% and presently (June 2021), only stands at 7.2%.

A lot of this tracked progress is owed to decisions made from the top. The Bank’s management in a bid to combat this perennial issue took these measures:

  1. ensured a diversified portfolio with immense focus on viable sectors.
  2. they further decreased interest income rate which in the short run may appear negative (because interest income impacts gross earnings negatively, causing a 20.9% reduction in Half-year net interest income results) but in long run, holds only advantages as these tremendously drives down the chances of non-performing loans.
  3. The insistence on additional capital requirements for high-risk weighted assets.

These, and a plethora of other steps appear to be FirstBank’s managements tactics so far as we can see. And as things stand, there is no denying the expectation that the Bank’s look on course to successfully drive down their NPL ratio to 6% by year-end.

The Bank has remained dazzling in its other performance metrics. Just recently, FirstBank broke through the N5 trillion threshold by mobilizing customer deposits of N5.1 trillion in the half-year of 2021. This is suggestive of the bank’s impeccable pedigree and shows the level of confidence the public has in its brand. The bank undeterred, improved its loans and advances to customers by up to 14.5% from N2.2 trillion to N2.5 trillion in June 2021 year on year.

This was largely due to the NPL improvements which restored investors’ confidence. And success with NPL means the quality of assets is bound to rise. FirstBank this half-year, posed a notable financial position with Total Assets now amounting to N8 trillion rising 4.4% year on year.

The performance this term is describable as remarkable. Given the tenacity and relentlessness, we have seen to drive down non-performing loans, we expect more improvement by year-end.