FBNH Hits N795bn Amidst 'Confusing' Shareholders Information

FBN Holdings (Ticker: FBNH) Plc’s market valuation inched higher by 10.75% over five trading sessions that ended on Friday, data from the Nigerian Exchange (NGX) shows. Bargain hunting on the financial service resulted in a jump in its market valuation which printed at more than N795 billion.

The financial services group’s valuation started to ascend following a large unusual volume purchase by its erstwhile Chairman Oba Otudeko.

In a statement posted on its website, Honeywell Group Limited told regulatory authorities that it bought 4,770,269,843 shares of FBN through its affiliate company, Barbican Capital Limited.

After a 14% share acquisition from the open market, Otudeko names was mission as an influential if not single largest shareholder in FBNH book, its unaudited financial statement for the nine months of 2023 showed.

A deep scrabbling into its nine-month unaudited financial report revealed that management excluded more than 14% of FBNH shares outstanding acquired by Barbican Capital Limited.

Some critics think Otudeko’s exclusion is a dirty precedent for a publicly listed company but others think prior experience with the ex-chairman could trigger new corporate governance risks for the group after balance sheet clearing efforts.

“Why is Otudeko coming back to FBNH after Godwin Emefiele exits the Central Bank of Nigeria as Governor”? MarketForces Africa gathered from investment analysts that the move was calculative enough, though negative signal about ongoing discussion on insider loans in banks.

The financial market hates distortions, while vested interests dislike anything that could disrupt the smooth operation of the market, MarketForces Africa gathered at its analysts’ forum on the legality of FBNH blocking anyone from buying its shares in the open market.

Finance expert Olumuyiwa Adebayo CFA explained that when shares are purchased, especially in publicly traded companies, they are usually recorded in the company’s register of shareholders. This is important for the exercise of shareholder rights.

He noted that in some cases, shares may be held in a nominee account, where the shares are registered in the name of a nominee (like a brokerage firm) rather than the actual owner.

The beneficial owner still retains their rights, but the nominee’s name appears on the shareholder register, Adebayo told MarketForces Africa in a chat. In private companies, there may be agreements or arrangements that affect share ownership visibility, the CFA chartered holder said in the conversation.

Citing an example, he said silent partners or investors may choose not to be publicly listed for various reasons. The legality of not listing a genuine shareholder in the shareholder register can vary depending on jurisdiction and the specific circumstances”.

Adebayo said generally, failing to register a legitimate shareholder could be a violation of corporate laws and might lead to legal consequences.

“If the intention is to block someone’s interest or rights as a shareholder, this could raise significant legal and ethical issues. Shareholder rights are protected by law in most jurisdictions, and any attempt to undermine these rights might be subject to legal challenge.

“Good corporate governance practices call for transparency in the ownership and control of companies. Deliberately obscuring or misrepresenting shareholder information can be a red flag for poor governance practices”, Adebayo explained.

Afrinvest Head of Investment Research Damilare Asimiyu agreed to the saying that FBHN does not have outright power to blacklist a majority shareholder who purchased in the open market.

“But you know the case of Otudeko is complicated. I’m not sure the omission of his name was based solely on FBHN management’s decision alone. I see the hand of regulators – CBN and SEC – in this development. My suspicion is based on the multiple twists to the ongoing dispute between one of Otudeko”s firms and Ecobank (N5.5bn) which the CBN is very interested in”. 

Asimiyu recalled that before the CBN dissolved FBNH board in 2021 (which Otudeko headed) there were several allegations of the chairman (Otudeko) being responsible for a significant share of the bank’s non-performing loans.

Hence, the reason for the CBN dissolving the board. Since then (based on earnings numbers in 2021-9M: 2023), FBNH books have improved significantly with the NPL ratio now below the prudential threshold of 5% – the first time since 2014.

Afrinvest’s Head of Investment Research told MarketForces Africa that the CBN in a circular on July 13, 2023, to banks and other financial institutions (OFIs) prohibited anyone, directly or indirectly, from owing a majority stake in 2 or more financial firms.

The penalty for violating this Prudential guideline targeted at reducing corporate governance risk was not directly stated but I suspect it might be responsible for this omission if Otudeko has been found wanting.

FBNH’s latest financial statement showed that Femi Otedola’s total shareholding was 5.65%, rising from 5.57% in the comparable period in 2022. Tunde Hassan-Odukale, another influential shareholder owned 4.40%, a drop from 4.42% held in the comparable period in 2022.

FBNHoldings Plc with a free float value of N521,424,920,295.90 (88.85%)as of September 30, 2023, is compliant with the Nigerian Stock Exchange’s free float requirements for companies listed on the Premium Board, it said in its unaudited financial statement reviewed.

Since Otudeko acquired the shares earlier in the year, analysts said it is supposed to reflect on the financial services group’s shareholding table in the third quarter. #FBNH Hits N795bn Amidst Confusing Shareholders’ Information Naira Devaluation Deepens Economic Crisis in Nigeria