Progress Against Strategic Priorities

Scale (Assets)

With respect to scale, the Bank continues to grow at a healthy pace organically and, as at YE2009, the Bank had an estimated 13% market share of assets. The Bank views inorganic growth as a viable and appropriate growth route, where a suitable combination and terms can be found. We continue to explore various options. While recent regulatory statements imply that certain limits may be placed upon the relative size of banks, we believe that FirstBank should aspire towards a 20% market share domestically.

Profitability/Capital Efficiency (ROA, ROE, Cost-to-Income)

FirstBank continues to strive towards its profitability and capital efficiency targets. Having already achieved its (pre-exceptional provisioning) ROA goal, the Bank has resolutely set its sights on new ROE and cost/income targets. With a marginally depressed ROE post-equity offer in 2007, FirstBank is judiciously working towards boosting ROE by improving its leverage (with a strong emphasis on low-cost current and savings deposit mobilisation) and enhancing its share of fee and commission income. While cost-cutting initiatives are ongoing, FirstBank envisages that major cost-to-income ratio improvements will come from the income side of the equation – by improving its share of fee/commission income, optimising its liquidity position (i.e., strongly incentivising growth in the loan book versus liquid assets in the near-time), and increasing its yield on earning assets.

Asset Quality (NPLs) metrics

In line with the industry, FirstBank experienced an increase in its non-performing loan ratio due to the general slowdown in economic growth and direct or indirect exposure to sectors affected by the 2008–2009 decline in oil prices and the domestic equity markets. The Bank made aggressive provisions and write-downs in 2009 in line with prudential guidelines and expects that the overall asset portfolio quality will improve shortly, all else being equal. As the Bank extends its franchise further in the middlemarket corporate (commercial) and consumer lending space, risk management systems and processes will be strengthened to optimise portfolio quality and to ensure that margins reflect and adequately compensate for risk.

Insurance

In 2009, significant efforts were made to analyse and understand the insurance sector and, subsequently, FirstBank reaffirmed an earlier strategic decision to invest significantly in this space. FirstBank has considered various models of entry into the insurance sector (including offering bancassurance products for third-party insurance underwriters) and has held exploratory discussions with a number of insurers. The decision was ultimately taken to participate directly as an underwriter (selling via the Bank, the internal brokerage business, and third-party brokers) but in a joint venture with a strong technical partner. Consequently, the Group has entered into an agreement with Sanlam – South Africa's no. 1 general insurance and no. 2 life insurance company, with operations in seven African countries – to run a joint life and general insurance underwriting business in Nigeria. We envisage that the business will be launched in 2010. As a step forward, a life assurance underwriting licence was obtained in February 2010.

International Expansion

Outside Africa, FirstBank has been a pioneer in international expansion, establishing a UK branch in the 1980s and subsequently a fully fledged FSA-regulated bank in the UK (FBN Bank UK Limited). FirstBank also operates a representative office in South Africa (Johannesburg) and was similarly a pioneer in China – launching a Beijing office in December 2009, which was the first China Banking Regulatory Commission-licensed representative office of any Nigerian bank. Lastly, FirstBank has applied, and is expecting approval, for a representative office licence in the United Arab Emirates.

Service delivery

FirstContact

We launched our 24/7 contact centre to provide customers with easy, anytime access for issue resolution, as well as a means of convenient processing for select transactions. The contact centre offers a variety of services, including account balance enquiries, electronic product sign-up (e.g., internet banking, sms alerts), information on our products and services, issue resolution, emergency services (e.g., stop cheque, debit card hotlisting), and serves as a 'one-stop' knowledge base for anything FirstBank. Significant efforts have been made to create awareness of FirstContact to our customer base, including updating all customer touchpoints with the FirstContact information and targeted advertisement through various channels.

FirstServe

FirstServe is our new Centralised Processing Centre (CPC), set up to remove routine processing tasks from our branches to a centralised unit, with a focus on improving standardisation, reducing processing turnaround time, and freeing up our branches to focus on customer interaction and service instead of data processing. The project is also focused on re-engineering processes that remain in the branch to be more efficient and customer friendly. We have rolled out the CPC and connected select branches in four cities – Lagos, Abuja, Port-Harcourt and Ibadan to the CPC. Initial processes impacted at the CPC or branch level include retail liabilities processing (account opening, account maintenance, electronic product signup and processing, etc.), retail loan processing, third-party transfers, and cheque confirmation, among others.

Touchpoint re-engineering

A comprehensive review of our touchpoints is in progress with a focus on ensuring they each transmit our desired service delivery standards. In 2009, we made significant progress on priority touchpoints, specifically a revamp of our corporate website, and redesign of select forms to enable easy sign-up for electronic services. We also launched electronic statements to meet customer service expectations, as well as optimise our operating costs for monthly statements.

Operational Excellence

Fleet management

We have designed a new fleet management process to optimise the usage and streamline the costs of our fleet operations. Once in steady-state, we expect to realise a more streamlined process and significant annual savings in both our depreciation costs and operating costs (fuelling and maintenance).

Manning optimisation

A detailed review of our manning levels is in progress for both our head office operations and our branch operations, with the objective of streamlining activities, cutting, increasing efficiency and reducing our costs.

Quick-wins

A number of initiatives were successfully implemented to reduce waste in the system, including a revised travel policy, move from printed to electronic statements, improved leverage of voice-over IP (communication among our branches), and optimised power usage in our Head Office. At steady state, these quick-wins will result in over N350 million in annual savings.

HCMD internal restructuring/new operating model

To align with our drive to continuously deliver quality and strategic support to the Group in a timely and effective manner, the human capital department is now made up of the following units:

• HR Strategy (manpower planning, special projects and strategic recruitment)
• Business Advisory (Head Office, Lagos, West, South and North)
• HR Support (compensation and benefits, performance management, first dependants pension/gratuity)
• Medical, Health, Safety and Wellbeing
• Insourcing Ltd (third-party/contract staff administration)
• Employee Relations, Culture and Involvement
• Learning Advisory (Head Office, Lagos, West, South and North)
• Curriculum and Development.

Workforce realignment/analysis

To address the uncompetitive nature of our workforce, which was skewed towards back-office/operational functions, we embarked on a workforce realignment initiative. The initiative is geared at restructuring the existing work groups to make them more efficient, more competitive and skewed towards market-facing functions. Existing and new jobs identified were also profiled to determine their worth.

The core to non-core exercise has reduced significantly the variance between core and non-core staff in the Bank and also freed up core staff to handle more strategic functions.

Job analysis/competency profiling

To ensure that jobs were properly evaluated for worth and benchmarked with industry standard, with the assistance of a South African-based consulting firm, we carried out job analysis. In addition, all the competencies required have been profiled and documented.

Optimal manning structure

A project team was set up in conjunction with corporate transformation; the aim is to review our current manning structure, roles, job descriptions and KPIs to ensure their alignment with our focus of service delivery.

Recruitment

A total of 690 staff were recruited as at 30 November 2009. We also headhunted specialists with relevant skills to champion some of the Bank's key focus areas such as: risk management, operational risk, information technology, marketing communication, strategy and corporate development, corporate transformation and investor relations.

Banking Foundation Pool Programme (BFPP)

The BFPP was further enhanced to provide the Bank with young talents and rejuvenate the workforce. In the financial year, 481 successful candidates have been deployed to various branches Bank-wide.

Attrition analysis

We managed to keep our attrition rate at 9% against an industry average of 10%.

• Standard staff gym.
• Revamped staff canteen.
• Free medical campaigns.
• Vaccination against cholera and hepatitis.
• Support of the provision of anti-retroviral drugs.
• Introduction of ergonomics.
• Establishment of clubs and classes for tae kwon do, aerobics, swimming and dance.

• 602 courses (in-house, open and overseas trainings) were run.
• A total of 7,650 staff (93.05%) were trained.
• 1,304 were trained in sales and marketing programmes.
• 243,704 credit hours were achieved, representing about 71%.
• 373 on mentoring/buddy scheme.

Reduction in the number of grade notches

The number of grade notches reduced from six to five and making the salary differentials between the notches significant, thereby ensuring that movement up the notches is a reward.

Introduction of performance pay

Creation of special notches for the following categories:

• Officers with exceptional competencies and work experience.
• Expatriates.
• Inpatriates.

Review of the CAMA to align with performance criteria and also serve as a bonding and celebration forum.