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288 Pages·2012·5.21 MB·English

FIRST BANK OF NIGERIA PLC
ANNUAL REPORT AND ACCOUNTS 2011
NIGERIA LONDON JOHANNESBURG PARIS BEIJING
ABU DHABI DEMOCRATIC REPUBLIC OF CONGO
Read this report online First Forward – on our transformation journey
This year’s report title, First Forward, reflects our progress towards
consolidating our industry leadership. During the year, we navigated a
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competitive and evolving financial landscape and continued transforming
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our business and the way we interact with a dynamic marketplace.
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The banking and broader financial services industry remains
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fundamentally attractive now and for the medium to long term. We
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believe that sustained improvement in our performance, clarity of
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direction and restructuring ideally positions us to readily recognise and
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seize these opportunities and realise our aspiration to become Sub-
• ‘Compare to last year’
Saharan Africa’s leading financial services group.
function
In 2012, we will offer more integrated solutions for our customers,
improve our standards of excellence and ultimately drive value for
our shareholders.
www.firstbanknigeria.com/
About FirstBank
annualreport/2011
FirstBank has its headquarters in Lagos, Nigeria and international presence in London,
United Kingdom; Paris, France; Johannesburg, South Africa; Beijing, China; Abu Dhabi,
UAE; and Kinshasa, DR Congo.
Drawing from our experience since 1894 and with a focus on growth and efficiency, we
continue to consolidate our footprint in Nigeria, diversify and transform our Bank and
Visit our investor relations website build scale internationally. Being the most resilient financial brand in Nigeria, we remain
the ‘clear leader and Nigeria’s bank of first choice’ delivering best-in-class financial results
www.firstbanknigeria.com/ir/
while creating the enabling environment for sustainable long-term growth.
The FirstBank Group is a well-diversified financial institution with subsidiaries involved in
Financial calendar
capital market operations, insurance services, investment banking and asset management,
www.firstbanknigeria.com/ir/financialcalendar
private equity/venture capital, pension fund custody management, registrar services,
Credit ratings
trusteeship, mortgage and microfinance banking. Within the Bank, we are structured
www.firstbanknigeria.com/ir/ratingreports
along corporate, institutional, private, public and retail banking customer segments,
giving us the ability to drive deeper product penetration and develop sector expertise with
relationship management based on a deep understanding of customer needs.
FirstBank has been listed on the Nigerian Stock Exchange since March 1971 and has an
unlisted Global Depositary Receipt (GDR) programme. Currently, there are 32.6 billion
issued shares with ownership from over 1.3 million shareholders across the globe.
The Bank continues to maintain strong ratings from Standard & Poor’s, Fitch, Global Credit
Rating and Agusto & Co. A recipient of several awards during the year, FirstBank attained
a BS 25999 certification in Business Continuity Management Systems from the British
Standards Institute (BSI), indicating a resilient capacity in achieving key business objectives
when faced with disruptions whether due to a major disaster or a minor incident and a
consistent framework based on international best practice to managing business continuity.
FirstBank Group has 717 business locations and 1,538 ATMs nationwide.
Contents
Introduction 2 Risk management and governance 113 Financial statements 173
Overview of FirstBank 2 Chief Risk Officer’s report 114 Statement of significant accounting policies 174
Financial and non-financial highlights 4 Risk management framework Balance sheet 180
Quick read Our approach 116 Profit and loss account 182
Group strategy 6 Governance and internal control 118 Cash flow statement 183
Bank strategy 8 Risk management disclosure Notes to the financial statements 184
Progress on our Bank transformation 10 Credit risk 121 Financial risk analysis 230
Review of operations 16 Market risk 127 Group statement of value added 239
Chairman’s statement 18 Liquidity risk 131 Bank statement of value added 240
Leadership and governance Operational risk 134 Group five-year financial summary 241
Board of Directors 20 Information security risk 139 Bank five-year financial summary 243
Executive Vice Presidents 21 Compliance risk 142
Managing Directors of subsidiaries 22 Legal risk 144 Company information 245
Shareholder representatives on the Directors’ report 146 Group and department heads 246
Audit Committee 22 Corporate governance report 150 Contact information 248
Awards 23 Accountability and audit Branch network 249
Responsibility statement 168
Business review 25
Report of the External Consultant Shareholder information 269
Group Managing Director/ on the Board Appraisal 169
Shareholder information
Chief Executive Officer’s review 26 Report of the Independent Joint Auditors 170
Global depositary receipts (GDR) programme 270
Operating environment 30 Audit Committee statement 171
Share statistics 270
Strategy and performance Directors and advisers 172
Dividend history 270
Strategic overview 32
Shareholding structure as at 31 December 2011 271
Group strategy 34
2012 FirstBank financial reporting calendar 271
Bank strategy 38
Share capitalisation history 272
Progress on our Bank transformation 48
Notice of Annual General Meeting 273
Review of operations 57
Proxy form
Key Performance Indicators 73
E-products activation form
Key risk summary 78
Stockbroker e-lodgement activation form
Financial review
Macro and industry overview 83
Glossary of ratios 281
Analysis of Group performance 84
Abbreviations 283
Analysis of subsidiary performance 96
Corporate social responsibility 106
Outlook 111
www.firstbanknigeria.com/annualreport/2011 First Bank of Nigeria Plc Annual Report and Accounts 2011 1
Introduction Business review Risk management and governance Financial statements Company information Shareholder information
Overview of FirstBank
Group structure For more detail
turn to page 36
The FirstBank Group comprises 12 subsidiaries, spanning
asset management, investment banking, capital markets,
insurance, microfinance, private equity, mortgage and
FirstBank
pension fund custodian services – making it one of the
most diversified financial conglomerates on the continent.
FBN Banque
FBN Bank FBN First FBN
First FBN Life First First FBN FBN Bureau Inter-
(UK) Insurance Pension Microfinance
Registrars Assurance Funds Trustees Mortgages Capital de nationale
Limited Brokers Custodian Bank
Change de Crédit
FBN Bank
(UK) FBN South Africa China Abu Dhabi
Limited Securities Rep. Office Rep. Office Rep. Office
Paris
branch
Our presence Strategic approach For more detail
turn to page 32
Restructuring for growth
Group vision Group Business line expansion
BEIJING To become Sub-Saharan Africa’s strategic International expansion
LONDON leading financial services group priorities Group synergies and cross-selling
PARIS
Sequencing growth systematically
ABU DHABI
Fees and commissions increase
Selective loans and advances
Bank
(LAD) creation
LAGOS financial
KINSHASA priorities Pricing optimisation
Low-cost deposit mobilisation
Bank vision Operating expenses (OPEX)
containment
To be the clear leader and
JOHANNESBURG
Nigeria’s bank of first choice
Service excellence
Brand transformation
Bank non-
financial Talent management
Head office Branch of London priorities Performance management
Subsidiary Representative office Credit quality/process excellence
2 First Bank of Nigeria Plc Annual Report and Accounts 2011 www.firstbanknigeria.com/annualreport/2011
Market capitalisation Credit ratings For more detail go to
www.firstbanknigeria.com/ir/creditratings
Report date National International Outlook
N290.43bn Standard & Poor’s January 2012 LnOgNAG+ TERM SnhgOAR-T23.8%1 TERM LBO+NG TERM6.7% SBhORT TERM Positive
Fitch ratings September A+(ngA) F1(ngA) B+ B Stable
2011
Global credit ratings August 2011 AA- A1+ - - -
Agusto & Co August 2011 A+ - - - Stable
42% 13%
Strategic Business Units (SBUs)
Corporate Institutional Private Public Sector 0.5%Retail 0.9% Treasury1
Banking Banking Banking Banking Banking
6.7
%
Customer Private organisations Multinationals and high net worth Federal and State Mass retail, affluent Treasury and
segments with annual large corporate individuals and governments as well as small corporate related
mrNe5ivd0es0ni zumee ia lglniorden al aaterngrd et h an 23.8%cgNlr5iee bantitlesli row tnhitahn r e venue6.7% families23.8% 6.7% 13% bg10.2%uosvienrensms eanntds Local 29.1% activities
corporate clients with 23.8%
aenxcneusasl oref vNe5n buiell iionn but 6.7% 42
with a key man risk %
NN’emt nrevenue 31,3976.7% 23.8% 432% 9,301 13%23.8%13%1,59412% 6.7% 30.5013%,444 0.9% 118.3%09,016 49.6% 32,968
%
%N%a23.8n%u doom ffa42b %dldeoevrap anoonsfsc a ietcsscount6s.7% 232.83%.8%13%7,42%4410.5%2 36..786%62%.7.3%7.%8%13%13%30.5%10.2%,0.9%4722%13653..87%4%%27% 1438..02%%0.9%42%0.5%29.1%00.5.45%02%1.%379%%01 0.91%0.2%0013%00.9%.5..%0952.059%%.%9.1%%10.2%29.31%,87601 .9%02 .19420..9%21%.%64%929..2916%%9.0.1%%18.3%2,2901.1%8404.93.7.%65%%,4949.9641%98 ..65%%0.7% 00.7.%7NN%AA 0.7%
at the en0.5%d of 2011 0.9% 42% 18.3% 02.99.1%% 10.2%49.6% 1029.1%.2% N4S11o88,.3o%.30%ur7tthh71 8 .3% 49.6% N5So,o60u.r75%tthh1,841
See page 6110.2% See page 63 See page 66 See page 68 See page 70
www1. firsTtrbeaanskunriyg eirsi an10..2%cootm a/ asntnrautaelrgepico rbtu/2s0in11es29.1s% unit but co0n.5t%ribu18t.3%es to t1h0.2e net revenu49e.6% an2918.3%d.10.7%% percentage of depos49.6%its. Fir0s.7%t Bank of Nigeria Plc Annual Report and Accounts 2011 3
% 49.6
%
49.6% 0.7% 0.7%
18.3% 18.3
% 0.7
%
0.7%
Introduction Business review Risk management and governance Financial statements Company information Shareholder information
highlights
For the year ended 31 December 2011
Group Bank
Financial Non-financial
Total assets (N‘bn)
Strategic review
1,528(USD13.1 mn) 1,165(USD0.0 mn) 2,010(USD13.8 mn) 1,667USD11.5 mn) 2,174(USD14.7 mn) 1,772(USD12.0 mn) 2,305(USD15.5 mn) 1,962(USD13.2 mn) 2,839(USD18.2 mn) 2,464(USD15.8 mn) AovbrWeepatgni netitthorkhuaiinnenrteai go ltg nharaaseocnn quodBdupf a i stonalhiesutkeivs,roee nGwtlo, . repmo2 eu0barp1ena’g1tasi a goLmnenif maeaal rle Iyknnn esetdiu wn rgtta erhtnoghecurr eaepfi te,sre -sudyatbe nsfaiduinrd lvliso aetyursreytarm a tjeorfie girnnosictttf
1 ( planning cycle expanding our four key strategic pillars to
five financial and five non-financial priorities.
Mar 08 Mar 09 Dec 09 Dec 10 Dec 11
Service delivery and operational excellence
3000 Gross earnings (N‘bn) In the 2012 KPMG Customer Satisfaction Survey, assessing
11225050500000000000 156SD1.3 mn) 131(USD1.1 mn) 218(USD1.8 mn) 185(USD1.5 mn) 194(USD1.4 mn) 175(USD1.3mn) 232(USD1.6 mn) 209(USD1.4mn) 296 (USD1.9 mn) 276(USD1.8 mn) 21fTWpra00ooel1trme ht1an el6t,ptno t heth aor8 antf tonoshd cru3 m eppirndpdae no tirnchrofte eou t, hor rr temueh rticen aao itinnlBer pcrcacrnoeunears kaamlt s toememawd ocn eouvfarroes ktgdcsofeu oemgfsrmr cmoeoermee n snn emtaptg easmrrnuafearonvngrkemteiy.nm agane ncondeft
U management, completed an extensive staff compensation
(
review exercise and conducted a review of score cards
Mar 08 Mar 09 Dec 09 Dec 10 Dec 11 and Key Performance Indicators (KPIs) for individual roles
across the Bank.
Deposit liabilities (N‘bn)
112230505000000 700(USD6.0 mn) 662(USD5.7 mn) 1,194(USD8.2 mn) 1,072(USD7.4 mn) 1,343(USD9.1 mn) 1,244(USD8.4 mn) 1,450(USD9.8 mn) 1,331(USD9.0 mn) 1,948(USD12.5 mn) 1,784(USD11.5 mn) BOBptCWphraerruoeeenrarc c kdnfieec bnipsdotsrat m afitnqouenrcpunnfadifira dan eaclal hntsiisemrtefdeanyon renscv srnusayiimcvf tsnoeaettaadrslloylm yitw sn,pie aoiarncretrnoitgcdvoooi csnetr ne.hw msessees teBqd reeaa uttnxeioenkcnugg etary l lys lt, ehc areren em- icpdmBaeoitapr sknriotepkitvoo’s ilnl neiceggaydrd o ewattrnhh tidhnee
50 imperative while a new recovery structure was established
Mar 08 Mar 09 Dec 09 Dec 10 Dec 11
0 to focus on prompt workout of delinquent accounts.
Profit before taxation (N‘bn)
Bank operating structure
2000 48(USD0.40 mn) 26(USD0.21 mn) 28(USD0.22 mn) 46(USD0.37 mn) 12(USD0.09 mn) 8(USD0.06 mn) 34(USD0.23 mn) 34(USD0.23 mn) 50(USD0.33 mn) 53(USD0.35 mn) 2uinctnho0no erc1dwp uB1eo srca rt muntaohltkmmaee re eiknndfrefe-aeedcwtsce iknt tn oihgvwtpeer iiei lnctyerhi tantsiyhtned ien ra vC ngoceod frss er toptsarhpuuotiiecrrso atc nfisuitae errosleg itfsB m r aaaefteu nsidonulkle ntlity.nd ienagicacg arrS otiBneosU dfsa ,note he mpienne ecsrBruraegatraiininnnskggge,
1500 Mar 08 Mar 09 Dec 09 Dec 10 Dec 11
Exchange rate as at December 2011 was N155.7 to USD1, with an average rate in the year at N152.1
1000
to USD1 (December 2010 was N148.7 to USD1, with an average rate in the year at N148.3 to USD1).
500
4 First Bank of Nigeria Plc Annual Report and Accounts 2011 www.firstbanknigeria.com/annualreport/2011
0
60
50
40
30
20
10
0
The Group The Bank
12 months to 12 months to 12 months to 12 months to 12 months to 12 months to
Dec 2011 Dec 2011 Dec 2010 Dec 2010 Dec 2011 Dec 2010
N million $ million N million $ million N million N million
Major balance sheet items
Total assets and contingencies 4,385,570 28,167 3,327,636 22,383 3,030,917 2,296,570
Total assets 2,839,373 18,236 2,304,686 15,502 2,463,543 1,962,444
Loans and advances 1,235,615 7,936 1,127,900 7,587 1,128,851 1,017,411
Deposit liabilities 1,947,803 12,510 1,450,095 9,754 1,783,777 1,330,771
Share capital 16,316 105 16,316 110 16,316 16,316
Shareholders’ funds 365,485 2,341 339,205 2,274 373,572 345,922
Major profit and loss account items
Gross earnings 296,329 1,949 232,079 1,565 275,629 209,187
Charge for doubtful accounts (44,814) (295) (21,590) (146) (41,902) (22,596)
Profit before exceptional item and taxation 65,555 431 33,541 226 68,029 33,154
Exceptional item (15,489) (102) 226 2 (15,501) 383
Profit after exceptional item before taxation 50,066 329 33,767 228 52,528 33,537
Taxation (5,281) (35) (4,590) (31) (5,066) (1,414)
Profit after taxation 44,785 294 29,177 197 47,462 32,123
Dividend
Declared 26,106 19,580 132 26,106 19,580
Information per 50k ordinary share
Earnings (basic) N N N N
Basic 1.40 0.95 1.45 0.98
Adjusted 1.40 0.95 1.45 0.98
Net assets 11.20 10.39 11.45 10.60
Total assets 87.01 70.63 75.49 60.14
Stock Exchange quotation 8.90 13.73
Ratios % % % %
Cost to income 56.8 67.0 55.1 65.8
Return on average assets 1.8 1.4 2.1 1.7
Return on average shareholders’ funds 13.0 9.6 13.2 9.7
Capital adequacy 20.5 20.4 26.0 27.6
Number of branches/agencies
and subsidiaries 717 652 650 611
Number of shares in issue (million) 32,632 32,632 32,632 32,632
www.firstbanknigeria.com/annualreport/2011 First Bank of Nigeria Plc Annual Report and Accounts 2011 5
Introduction Business review Risk management and governance Financial statements Company information Shareholder information
Quick read
Group strategy
The FirstBank Group aspires to be Sub-Saharan Africa’s leading diversified financial services
For more
provider. By virtue of being Nigeria’s largest bank, FirstBank is already the largest player in Sub-
detail
turn to Saharan Africa (excluding South Africa) and we have commenced a structured programme of
page 34 business line and geographic expansion.
2011 marked the first full year of operations of the Group’s life insurance subsidiary joint venture,
the first full year of our operationally integrated investment banking and asset management
group, and our first regional acquisition. 2012 will see us restructuring to a holding company
structure with an increased focus on driving synergies and cross-selling across our businesses and
d
expanding into the general insurance space.
a
Objectives • Enhance our value proposition to customers via the offering
of seamlessly integrated solutions.
e • Boost shareholder value as revenue and cost synergies are
exploited across businesses and geographies.
• Diversify the Group income stream.
r

Key initiatives For more detail
k turn to page 36
Related initiatives/2011 progress
c
Restructuring for growth • Set-up of new Group holding company.
• Initiated process of divestitures of non-core businesses.
i
Business line expansion • Establishing a leading domestic investment bank.
u
• Establishing a leading insurance underwriting business.
• Focusing heavily on priority businesses within each business
group (e.g., emerging corporates, asset management).
Q
Group International expansion • Acquisition of Banque Internationale de Crédit (BIC), DRC.
strategic • Launch of UAE representative office.
priorities
Group synergies • Coordinating activities of private banking businesses
and cross-selling across geographies (i.e. Nigeria, UK).
• Significant increase in joint mandates between Investment
Banking and Asset Management business (IBAM) and
commercial bank (Institutional, Public Sector SBUs).
Sequencing growth • Completed operational integration of IBAM to enhance
systematically competitiveness and position for building scale.
• Focus on inorganic expansion of core banking business.
6 First Bank of Nigeria Plc Annual Report and Accounts 2011 www.firstbanknigeria.com/annualreport/2011
Quick read
Group strategy
Measuring our success Current Group strategy progress For more detail
turn to page 34
We have achieved our short-term goal of consolidating leadership in Nigeria and 2012 will see us move
#1 position across
into our next phase of diversifying the Group structure and completing our transformation initiatives.
major balance sheet
metrics in Nigeria Consolidate leadership Diversify Group and Build scale
position in Nigeria transform Bank internationally
Be number one in every Drive Bank transformation Significant SSA expansion
business segment. to completion. and growth in banking with
selective international foray in
Gross premium Continue aggressive Bank Build scale in investment
non-Bank financial services.
transformation. banking, asset management
income earnings of and insurance and leverage Focus on driving economies
Structure for growth in
Group synergies. of scale and scope across
investment banking, asset
over N1 billion in international network and
management and insurance. Commence SSA regional
portfolio businesses.
expansion in earnest.
FBN Life Assurance Rep office expansion; initial
SSA exploration/foray.
Long term
Medium term
Short term
Over N97 billion AUM
in IBAM Current progress
Acquired one of the
most profitable banks in
Opportunities and challenges
the Democratic Republic
Being one of the few banking groups in Nigeria plans, which are expected to deliver benefits including
of Congo that will evolve into a universal banking group, we greater earnings diversification and increased
see significant prospects to maximise cross-selling shareholder value through higher returns on equity.
opportunities across our businesses. New business
With respect to our transformation to a Holdco
lines added to the Group in the last few years will also
structure, our challenge will be to ensure that it is
considerably deepen our service offerings, facilitating
completed quickly and carefully, within the stipulated
FBN Bank UK is the #1 the delivery of superior financial services across a
time set by the CBN and with minimum disruption to
wide spectrum and ensuring there is no vacuum in
our Group activities. In this regard, we have set up
Nigerian bank in the UK meeting the needs of our customers. The acquisition
a dedicated project implementation team to manage
of Banque Internationale de Crédit (BIC), one of the
and own the process, with direct oversight by the
across all metrics
most profitable banks in the Democratic Republic of
Group executive management.
Congo, launched our Sub-Saharan Africa expansion
www.firstbanknigeria.com/annualreport/2011 First Bank of Nigeria Plc Annual Report and Accounts 2011 7
Introduction Business review Risk management and governance Financial statements Company information Shareholder information
Quick read
Bank strategy
2011 marked the beginning of a new three-year strategic planning cycle for FirstBank. As a bank,
For more
we affirmed our vision of being the ‘bank of first choice’, wherever we operate, and articulated
detail
turn to aspirations to defend our scale, extend performance leadership to a broader set of metrics, lead
page 38 our peers in every business in which we operate, and balance short-term performance with the
long-term health of our banking franchise.
In 2011, we achieved growth of 34% in deposits and 48% in profit before tax (PBT) and the
recognition of our brand as the number one bank brand in Nigeria by Brand Finance, and
FirstBank as the most innovative bank in Africa by the African Banker magazine.
d
Objectives • Deliver superior shareholder value via an aggressive focus
on growth and profit maximisation.
a
• Expand the Bank’s leadership into other dimensions –
customer satisfaction and value, employee desirability,
e capital efficiency, etc.
• Position the Bank for sustained dominance in a complex
and rapidly evolving market.
r

Key initiatives Strategic priorities For more detail
k turn to page 41
to 2013
Towards the end of 2010, we began
c a process to review our medium-term
strategy. As part of that strategic Fees and commissions increase
planning exercise, we expanded Selective loans and advances
i the four key strategic pillars, which Bank (LAD) creation
financial
u formed the basis of our strategy in priorities Pricing optimisation
previous years, namely growth, service Low-cost deposit mobilisation
excellence, performance management Operating expenses (OPEX)
containment
and people into five financial and five
Q
non-financial priorities, which will form
Service excellence
the basis of our focus in 2011–2013
and act as levers to drive our 2013 Bank non- Brand transformation
strategic targets. financial Talent management
priorities Performance management
Credit quality/process excellence
8 First Bank of Nigeria Plc Annual Report and Accounts 2011 www.firstbanknigeria.com/annualreport/2011