FBN Holdings Plc has announced that proceeds from the sale of its life insurance business, valued at N25 billion ($66m) has been invested as equity into its commercial banking subsidiary, FirstBank to boost the Bank’s Capital Adequacy Ratio (CAR). With this fresh capital injection, FirstBank’s CAR has increased to 16.53 per cent (before capitalising year to date profit) as at June 2020. The regulatory minimum is 15% for local lenders with international licences.
In a statement released to the market on Monday, the Bank’s Chief Financial Officer, Oyewale Ariyibi said the divestment and subsequent investment of the fund in its commercial subsidiary is in line with the Group’s medium to long term strategic objectives.
“The divestment has unlocked significant value embedded in the former subsidiary which is being leveraged to strengthen the core banking business for which the Group is renowned. The overriding objective is to optimize capital across the Group to drive business growth, enhance efficiency and improve overall Shareholders’ value”, he said.
Earlier in the day, while commenting on the Group’s Half Year 2020 performance, UK Eke, the Group Managing Director stated said “The H1 2020 financial results are impressive and reconfirm our consistent focus on enhanced shareholder value. Despite the difficult operating environment, the results demonstrate our capacity to deliver exceptional services to our customers in these uncertain times. Looking ahead, we remain cautious, but confident that our business is fundamentally strong to surmount any future challenge towards delivering superior financial performance”.
In 2010, the Central Bank directed all lenders to either sell their stakes in their subsidiaries involved in activities including insurance, asset management and investment banking OR adopt a holding company structure where those activities are separated from the holding of retail deposits. Apart from FBNHoldings, other banks with holding company structure include FCMB Group Plc and Stanbic IBTC Holdings Plc.