By Babajide Komolafe

Competition, intense competition,heightened competition. These are the words commonly used to describe the banking industry in Nigeria. It was occasioned by the deregulation of the industry in 1996, which prompted entrance of many new banks. Despite subsequent reforms, the competition did not abate, but became fiercer, and constantly altered the landscape of the industry. Like a tidal wave, it has swept many banks away.

Some closed shop, some were acquired and some had to embrace merger to survive. Before 1996, the industry was dominated by four banks namely Union Bank, First Bank, UBA and Afribank. Competition has changed this. Three of these elite banks have been displaced from their eminent positions, but one member of this elite club has continued to defy competition. It is First Bank of Nigeria.

Another Year of Growth

The performance of First Bank of Nigeria Holding Company for its 2012 operating results indicates a bank that not only defied competition, but is also ahead of competitors. During the year, the bank recorded double and triple digits growth in all its performance indices.

Gross revenue grew by 31.4 percent to N359.8 billion from N273.8 billion in the 2011 operating year, while total assets rose 11 percent to N3.1 trillion from N2.86 trillion in 2011.   This growth was driven by 27.8 percent increase in net interest income, 20.1 percent increase in Non-interest income and 25.6 percent increase in operating income. Net interest income rose to N287.3 billion from N60.8 billion.

The bank recorded Non-interest income of N73.1 billion, up  from    N60.8 billion, while Operating income also went up to  N298.3 billion, from N237.0 billion in 2011.  This double digit increase income propelled a triple digit growth in profitability, with profit before tax rising by 158.5 percent to N92.7 billion from N35.8 billion.

The bank also improved its efficiency. For example, Net interest margin rose by 0.3 percent to 9.6 percent. Return on Average Equity, which shows how much the bank earned on each naira of shareholders’ money employed, rose three times to 18.8 percent. Return on Assets measures how much the bank earned from every naira of asset used, also tripled to 2.5 percent.

Furthermore, the bank’s Capital Adequacy and Liquidity Ratio, two critical indicators of soundness and financial stability, remained well above regulatory level at 21.9 percent and 55.4 percent.

Growth Drivers

But what is the secret of this performance? “We sustained our predominantly low-cost deposit funding base, achieving a year-on-year deposit growth of 23 percent,” Managing Director/ Chief Executive Officer, First Bank, Mr.  Bisi Onasanya said.  “The retail banking business continues to be the major driver of low cost deposits.

Continued healthy growth in the face of heightened competition underscores the confidence reposed in the Group by the public, the strength of the brand, benefits of the large retail customer base and footprint, multiple service channels and the depth of relationships across various customer segments”, he said.

Hence, customers’ deposits rose to N2.4 trillion from N1.95 trillion, and 80 percent of these deposits were low cost deposits, namely current account and savings accounts. For example, domiciliary deposits grew by 29.6 percent; savings accounts grew by 10.7 percent while current accounts rose by 7.8 percent.

This growth according to Onasanya, “was driven by continued innovative product development, targeted at helping our customers meet their needs.”  The bank not only attracted more deposits, it also cornered 23 percent more of the loan businesses in the industry, with its loans and advances rising by 23 percent to N1.54 trillion from N1.25 trillion in 2011.

Shareholders’ Interest

The improved business fortunes impacted positively on the value of shareholders’ funds pushing it up by 19 percent to N438.8 billion in 2012, from N368.6 billion in 2011.  To ensure that shareholders enjoy the benefits of increased profitability, the management has proposed a dividend of N1 per share.

Expansion to sustain growth

FBN Holdings has maintained its leadership position these years, because its management understands that the retail market and retail customers are key to sustaining growth and performance. Consequently, the bank further expanded its distribution network in Nigeria by 73 locations bringing its distribution network to 790.

This is complemented with aggressive roll-out of electronic banking products, to dominate the rapidly expanding electronic payment market. Presently, the bank dominates the e-banking space with highest number of electronic cards issued of five million cards, largest ATMs points of 2100, and 30 per cent of e-payment transaction.  The bank also wants expand its network outside Nigeria. According to Onasanya the bank intends to expand into 11 African countries specifically Francophone and Anglophone countries.