Femi Otedola Clarifies FirstBank's N748bn Bad Loan Write-Off as a Strategic Financial Move
Femi Otedola, the Group Chairman of First Bank Holdings, has provided a detailed explanation for the bank's decision to write off a staggering N748 billion in legacy non-performing loans. In a recent statement, Otedola described this action as a calculated and necessary step to secure the long-term financial health of the institution, even though it has led to a significant short-term impact on profitability.
Disclosure and Immediate Financial Impact
Otedola disclosed this information in a post on his X handle on Saturday, January 31, highlighting that the extensive provisioning exercise resulted in a dramatic 92 per cent drop in the group's reported profit. He emphasized that this move was not taken lightly but was essential for the bank's future stability.
Alignment with Central Bank Directives
The decision aligns closely with the Central Bank of Nigeria's directive, which urges banks to confront bad loans head-on rather than deferring the problem. Otedola noted that this proactive approach is crucial for maintaining a robust banking sector in Nigeria.
Rationale Behind the Decision
In his statement, Otedola explained, "At First HoldCo we decided to clean house properly. We took a huge one-time hit of N748bn to admit old bad loans instead of pretending they do not exist. That is why profit looks like it crashed by 92 per cent. Painful headline, but it is a serious long-term move." This candid admission underscores the bank's commitment to transparency and financial integrity.
According to the billionaire investor, this move was necessary to finally address problematic loans that had accumulated over several years. By doing so, First Bank Holdings aims to restore confidence among investors and other stakeholders, who have been concerned about the bank's asset quality.
Timing and Broader Implications
Otedola further elaborated on the timing of this decision, stating, "Why do this now? Because the CBN is pushing banks to stop kicking problems down the road. So First HoldCo basically closed the chapter on messy loans from past years which sends a clear message that borrowing has consequences and it helps rebuild trust." This statement highlights the bank's alignment with regulatory pressures and its focus on long-term sustainability.
The write-off of N748 billion in bad loans represents a significant step in the bank's efforts to strengthen its financial position. While the immediate profit decline is substantial, Otedola believes that this move will pave the way for a more stable and trustworthy banking environment in Nigeria.
This development is part of a broader trend in the Nigerian banking sector, where institutions are increasingly being urged to address non-performing loans to ensure overall economic stability. First Bank Holdings' action sets a precedent for other banks to follow, potentially leading to a healthier financial system in the country.
