Nigeria’s FBN Holdings Plc has sold its life insurance company and invested the proceeds of NGN 25B (US$66M) as equity into First Bank to boost its capital after restructuring its loan book, FBN said on Monday.
Nigeria’s banks are expected to take a big hit to revenues and face rising borrowing costs this year as central bank measures to support the naira squeeze lenders already hit by fallout from the coronavirus and the oil price shock, analysts say.
Chief Executive Officer Urum Kalu Eke said FBN Holdings sold its 65% stake in FBN Insurance to South Africa’s Sanlam Emerging Markets, a minority investor in the business.
He said the group wanted to focus on improving shareholder value with the divestment and boost the capital position of its commercial banking unit, First Bank, to 16.53% as of June, from 15.5% a year ago, close to the regulatory minimum of 15%.
“The outlook continues to remain uncertain. We think that the remaining part of the year will be challenged,” Eke said on an analyst call.
In 2010, the central bank directed lenders to either sell their stakes in subsidiaries involved in activities including insurance, asset management and investment banking – or adopt a holding company structure, where those activities are separate from the holding of retail deposits.
FBN Holdings said last Wednesday pretax profit rose 14.3% in the first half to NGN 41.4B while loans grew 7.7%, led by short-tenured credit due to a low interest rate environment.
First Bank said it had restructured around 15% of its US$4.6B loan book by mid-year after the central bank asked banks to allow customers struggling due to COVID-19 to defer interest for one-year.