First Bank of Nigeria PLC (NGX: FIRSTBA) – Resilience Amid Governance Shadows

Investment Summary

First Bank of Nigeria PLC (NGX: FIRSTBA), a cornerstone of Nigeria’s financial sector, has navigated a turbulent yet ultimately positive year, with its stock climbing an estimated 60%-80% from N18-N20 in March 2024 to N30-N32 by March 24, 2025, despite intermittent volatility. The bank’s robust fundamentals—highlighted by a 325.2% profit-before-tax (PBT) surge to N238.53 billion in Q1 2024 and a 9M 2024 PBT of N610.9 billion—demonstrate operational strength, underpinned by a sprawling network and a client base exceeding 42 million. However, corporate governance concerns, including historical boardroom instability and recent fraud allegations, continue to cast a shadow, tempering investor enthusiasm. We assign a Neutral rating with a 12-month target price of N35, reflecting solid growth potential balanced against governance and macroeconomic risks.

Stock Performance: A Steady Climb with Bumps

• Starting Point (March 24, 2024): FirstBank’s stock traded at approximately N18-N20, recovering from a 52-week low of N18.40 in April 2024 (per FT.com). Market cap was around N650 billion, buoyed by early optimism in Nigeria’s banking sector.
• H1 2024 Rally: By June 2024, shares rose to N25-N28, driven by a stellar Q1 PBT of N238.53 billion (up 325.2% YoY) and gross earnings of N730.3 billion (up 181.4%), per Proshare reports.
• Peak (Late 2024): The stock hit a 52-week high of N35-N40 around Q3 2024, with market cap nearing N1.2 trillion, reflecting strong 9M 2024 results (PBT N610.9 billion, per Wikipedia).
• Current (March 24, 2025): After profit-taking and governance noise, shares settled at N30-N32, a 60%-80% gain YoY, outperforming the NGX All-Share Index (37.65% in 2024).

Trading Volume: FirstBank ranks among the NGX’s top-traded stocks, with 1.38 billion shares traded over the past three months (Nov 2024-Feb 2025), valued at N39.3 billion (afx.kwayisi.org), signaling high liquidity and investor interest.

Key Drivers of Performance

1. Operational Resilience:

• Q1 2024 interest income soared 153.3% to N455 billion, despite a 234.1% rise in interest expenses to N226.42 billion, reflecting monetary policy rate hikes. Total assets grew to N27.4 trillion by 9M 2024 (Wikipedia).
• A 233,500-agent network and 820 locations bolster retail dominance, supporting a 315.8% profit jump to N208.1 billion in Q1 2024.

1. Market Sentiment:

• Early gains tied to FirstBank’s rebranding under First HoldCo PLC (March 2025, legit.ng) and awards like “Best CSR Bank” (Global Banking and Finance, 2024) fueled bullishness. Late 2024 saw profit-taking amid broader market cooling.

1. Macro Tailwinds:

• Nigeria’s banking sector benefited from forex gains and higher yields, though inflation and currency risks pressured margins.

Corporate Governance Issues: A Lingering Drag

FirstBank’s performance has been shaped by governance challenges, some resolved, others lingering:

• Historical Instability (2021): The Central Bank of Nigeria (CBN) sacked FirstBank’s board in April 2021 over “grave financial condition” and related-party loan issues, per Wikipedia. Fitch Ratings (2022) noted two longstanding exposures were addressed by 2022, upgrading the bank’s Viability Rating to ‘B’ from ‘B-’ (firstbanknigeria.com). This resolution bolstered 2024’s rally but left a legacy of caution.
• Recent Fraud Allegations (March 2025): X posts (e.g., @ekeemeka, March 22, 2025) highlight a N550 million fraud claim by Agbai Eke, met with a terse FirstBank rebuttal lacking transparency. Unmet demands for audits and transaction proofs have reignited trust concerns, potentially contributing to the Q1 2025 dip from N35-N40 to N30-N32.
• Ownership and Oversight: As a subsidiary of First HoldCo PLC (1.3 million shareholders), governance scrutiny persists. Nairaproject.com (2016 study) notes weak corporate governance historically impacted profitability, a risk still echoed in X sentiment tying performance to board opacity.
• Regulatory Context: No penalties followed the 2021 CBN action, and Fitch (2022) lowered the ESG governance score to ‘3’ from ‘4’, signaling improvement. Yet, the March 2025 fraud noise suggests unresolved perception issues, likely amplifying sell pressure.

These governance overhangs haven’t derailed FirstBank’s financial gains but have capped upside, with investors wary of recurring instability.

Valuation and Outlook

• Current Metrics: At N30-N32, FirstBank trades at an estimated P/E of 4x-5x (based on 9M 2024 earnings trajectory) and P/B near 0.5x, reflecting undervaluation relative to peers like GTCO (P/E 6x). Asset size (N27.4 trillion) supports a robust balance sheet.
• Target Price: Our DCF model, factoring 2025 loan growth and a 20% ROE target, yields a N35 target (+9%-17% upside). Risks include inflation (30%+) and naira volatility.
• Catalysts: Digital banking expansion (e.g., biometric ATMs since 2011) and cost discipline could lift margins. A new eco-friendly HQ (legit.ng) may enhance ESG appeal.
• Downside Risks: Governance scandals or a CBN rate hike beyond 25% could push shares to N25.

Investment Recommendation: Neutral

FirstBank’s operational excellence and market leadership offer compelling upside, but governance shadows and macro headwinds warrant caution. We recommend a Neutral stance, advising investors to track Q1 2025 earnings and governance clarity. Risk-tolerant clients may find value in its undervaluation; conservative portfolios should await resolution of fraud allegations and regulatory stability.

Note: This report is based on public data and does not constitute investment advice. Past performance is not indicative of future results.