First Bank of Nigeria Plc Head Office: 35, Samuel Asabia House, Marina, Lagos www.firstbanknigeria.com First Bank of Nigeria Plc | Annual Report & Accounts 2009 Registration No. RC6290 First Bank of Nigeria Plc | Annual Report & Accounts 2009 ABBREVIATIONS ALCO – Assets & Liabilities Management Committee KRI – Key Risk Indicator ATM – Automated Teller Machine LAD – Loans and Advances BARAC – Board Audit and Risk Assessment Committee LASACS – Large Scale Agricultural Credit Scheme BDO – Business Development Office mbd – million barrels a day ANNUAL CAGR – Cumulative Annual Growth Rate MDAs – Ministries, Departments and Agencies CAM – Classified Assets Management Dept MFBs – Microfinance Banks CAP – Credit Analysis & Processing Dept MFR – Member of the Order of the Federal Republic CBN – Central Bank of Nigeria mni – Member National Institute CCO – Chief Compliance Officer MPA – Mortgage Plan Account CON – Commander of the Order of the Niger MPC – Monetary Policy Committee REPORT CPFA – Close Pension Fund Administrator MPR – Monetary Policy Rate CRM – Credit Risk Management N – Naira CRO – Chief Risk Officer NSE – Nigerian Stock Exchange CSA – Children Savings Account OFR – Officer of the Federal Republic CSCS – Central Securities Clearing System OPL – Open Position Limit CSR – Corporate Social Responsibility ORM – Operational Risk Management Division ACCOUNTSIntroduction 2 Business Review 23 & EAR – Earnings At Risk OTC – Over The Counter Financial Highlights 2 Operating Environment 24 Chairman’s Statement 4 Industry Review and Outlook 30 ED – Executive Director PAT – Profit After Tax Group Managing Director/ The Bank 36 EPS – Electronic Payment System PFA – Pension Fund Administrator CEO’s Review 7 Corporate Social Responsibility 42 EXCO – Executive Committee POS – Point of Sale 2009 Milestones 14 Key Performance Indicators 48 FBN BDC – FBN Bureau de Change Ltd RCSA – Risk Control Self Assessment Board of Directors 16 Risk Management Disclosure 52 Awards 22 FBN MB – FBN Microfinance Bank Ltd RDAS – Retail Dutch Auction System FBN UK – FBN Bank (UK) Ltd RMD – Risk Management Directorate About FirstBank FCA – Fellow of the Institute of Chartered Accountants of Nigeria RTGS – Real Time Gross Settlement System Headquartered in Lagos, FirstBank has international presence through its FFL – First Funds Ltd SBU – Strategic Business Unit subsidiary FBN Bank (UK) in London and Paris and its offices in Johannesburg and FGN – Federal Government of Nigeria SEC – Securities and Exchange Commission Beijing. With about 1.3 million shareholders across several countries, FirstBank is quoted on The Nigerian Stock Exchange and has an unlisted Global Depository FIRS – Federal Inland Revenue Service SMEEIS – Small and Medium Enterprise Equity Investment Scheme Receipt (GDR) programme. FRNL – First Registrars Nigeria Ltd SMIEIS – Small and Medium Industries Equity FSRCC – Financial Sector Regulatory Coordinating Committee The Bank provides a comprehensive range of retail and corporate solutions Investment Scheme FSS – Financial Sector Strategy and through its subsidiaries contributes to national economic development – SRF – Strategic Resource Function FTNL – First Trustees Nigeria Ltd in capital market operations, insurance brokerage, bureau de change, private TLP – Total Loan Portfolio equity/venture capital, pension funds management, registrarship, trusteeship, GCFR – Grand Commander of the Order of the Federal Republic TSR – Total Shareholder Return mortgages and microfinance. GDR – Global Depository Receipt VAR – Value At Risk ISMD – Information Security Management Department Drawing from experience that spans 115 years of dependable service, the Bank WDAS – Wholesale Dutch Auction System has continued to strengthen its relationships with customers, consolidating KPI – Key Performance Indicator alliances with key sectors that have been strategic to the well-being and growth of Nigeria. FirstBank, unarguably the country’s most diversified financial services group, serves more than 4.2 million customers through 536 locations in Nigeria. www.firstbanknigeria.com OUR MISSION OUR BRAND OUR STRATEGIC To remain true to PILLARS PRIORITIES our name by providing • Enterprise • Growth the best financial • Service Excellence • Performance Management services possible • Heritage & People • Leadership • Operational Excellence OUR VISION To be the clear leader and Nigeria’s bank of first choice Financial Review 73 Company Information 131 Shareholder Information 163 Report of the Directors 74 Departmental Heads 132 Global Depositary Corporate Governance 79 Subsidiaries 135 Receipt Programme 164 Directors and Advisers 84 Business Development Managers 138 Shareholding Structure 164 Report of the External Consultant Contact Information 143 Dividend History 164 on the Board Appraisal 85 Selected Products and Services 146 Share Capitalisation History 165 Report of the Independent Branch Network 149 Financial Calendar 166 Joint Auditors 86 Notice of Annual Report of the Audit Committee 87 General Meeting Statement of Significant Forms Accounting Policies 88 Proxy Form Balance Sheet 93 E-Dividend Form Profit and Loss Account 94 CSCS Account Notification Form Statement of Cash Flows 95 Shareholder Online Access Notes to the Financial Registration Form Statements 96 E-Share Notifier Subscription Form Group Statement of Value Added 127 Bank Statement of Value Added 128 Group Five-year Financial Summary 129 Bank Five-year Financial Summary 130 2 Introduction GROUP FINANCIAL HIGHLIGHTS for the year ended March 31, 2009 bn Total assets 2,500 2500 2,009.9 2,000 2000 N2,009.9 billion 1,528.2 1,500 1500 31.52% increase 2008: N1,528.2 billion 1,000 911.4 1000 616.8 470.8 500 500 2005 2006 2007 2008 2009 0 bn 1,194.5 Deposit liabilities 1,200 1200 1,000 1000 N1,194.5 billion 800 700.2 800 599.7 600 600 70.59% increase 2008: N700.2 billion 448.9 400 332.2 400 200 200 2005 2006 2007 2008 2009 0 bn Gross earnings 250 250 218.3 200 200 N218.3 billion 155.7 150 150 40.17% increase 2008: N155.7 billion 100 91.2 100 67.4 57.3 50 50 0 2005 2006 2007 2008 2009 bn 60 60 Profit on ordinary activities before taxation 53.8 50 47.9 50 N53.8 billion 40 40 30 25.9 30 12.30% increase 2008: N47.9 billion 21.8 20 16.8 20 10 10 0 2005 2006 2007 2008 2009 First Bank of Nigeria Plc Annual Report & Accounts 2009 3 Financial Highlights 2 Chairman’s Statement 4 Group Managing Director/CEO’s Review 7 FINANCIAL HIGHLIGHTS Milestones 14 Board of Directors 16 for the year ended March 31, 2009 Awards 22 The Group The Bank 2009 2008 2009 2008 Note N’million N’million N’million N’million Major balance sheet items Total assets and contingencies 2,706,292 2,073,193 1,982,395 1,363,700 Total assets 2,009,914 1,528,234 1,667,422 1,165,461 Loans and advances 740,397 466,096 684,107 437,768 Deposits 1,194,456 700,182 1,071,836 661,624 Share capital 12,432 9,945 12,432 9,945 Shareholders’ funds 337,405 351,854 351,054 339,847 Major profit and loss account items Gross earnings 218,287 155,725 185,189 130,600 Charge for doubtful accounts (19,439) (6,028) (13,959) (5,819) Profit before exceptional item and taxation 53,799 47,906 46,110 38,020 Exceptional item (26,113) - - - Profit after exceptional item before taxation 27,686 47,906 46,110 38,020 Information technology development levy (526) (480) (461) (380) Taxation (14,591) (10,747) (10,575) (7,167) Profit after taxation 12,569 36,679 35,074 30,473 Dividend Declared - 23,868 - 23,868 Information per 50k ordinary share N N N N Earnings (basic) Basic 0.51 2.67 1.41 2.23 Adjusted 0.51 1.84 1.41 1.53 Net assets 13.57 17.88 14.12 17.09 Total assets – actual 80.84 76.80 67.06 58.60 – adjusted 191.84 145.87 67.06 111.24 Stock Exchange quotation at March 31 - - 15.80 47.24 Ratios % % % % Cost to income 66.79 63.69 67.43 64.48 Return on assets 2.68 3.13 2.77 3.26 Return on shareholders’ funds 3.73 10.42 9.99 8.97 Capital adequacy 24.30 42.30 29.74 48.23 Number of branches/agencies and subsidiaries 536 469 510 453 Number of staff 8,557 8,856 8,203 8,495 Number of shares in issue (million) 24,864 19,890 24,864 19,890 First Bank of Nigeria Plc Annual Report & Accounts 2009 4 Introduction CHAIRMAN’S STATEMENT “ Our tradition of firm governance, financial strength, conservative management and depth of expertise equips us to help rebuild trust in our industry and create a more stable financial sector.” Alhaji (Dr.) Umaru Abdul Mutallab (CON) Chairman Strong Fellow Shareholders, Invited Guests, have built our business on very strong Gentlemen of the Press, Distinguished foundations. Consequently, we are able to foundations Ladies and Gentlemen: I am pleased report results which demonstrate our ability We are able to report 2008/09 results to welcome you to the 40th Annual to withstand the storm. It is particularly that demonstrate our ability to General Meeting ( ) of your Bank, First worthy to note, in an era when the health of withstand the global economic and Bank of Nigeria Plc. the banking industry was in question, that financial storm. our Bank’s market capitalisation for year The financial year under review was ended December 2008 fell by 52% relative overcast by the global financial and to a 72% decline in the average market economic crisis, which was precipitated capitalisation of the listed Tier 1 banks at in August 2007 by the collapse of the Nigerian Stock Exchange. We believe the sub-prime lending market in the this resilience is a testimony to the strength United States. As the crisis deepened, of our brand, public acknowledgement of the key policy challenge was to ensure our strong corporate governance practices that demand did not slacken sharply. and financial strength, as well as a robust Accordingly, both fiscal and monetary risk management framework that eventually policies were loosened to accommodate ensured that our exposure to the stock unprecedented levels of liquidity market remained at the lower end of the support across economies.