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First Bank of Nigeria: Restructuring for High Performance

Article · June 2013

DOI: 10.1177/2277977913480658

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Case

First Bank of Nigeria: South Asian Journal of

Business and Management Cases
Restructuring for High 2(1) 51–60
© 2013 Birla Institute of Management Technology
Performance1 SAGE Publications
Los Angeles, London,
New Delhi, Singapore,
Washington DC
DOI: 10.1177/2277977913480658
http://bmc.sagepub.com
Ifedapo Adeleye

Abstract
Stephen Onasanya had successfully steered First Bank through a three-year period of accelerated
corporate transformation and growth, as the institution emerged from the global financial crisis of
2008. At the core of the bank’s transformation lay a new organizational structure. In 2010 the bank
had transitioned from a geography-based to a customer-based organizational structure, and redesigned
its nationwide coverage and deployment model to align with the new organization. In August 2012, it
was apparent that the restructuring had been successful. Apart from the impressive financial results
the bank had posted, significant progress had been made on many non-financial measures, including
customer satisfaction. Nevertheless, Onasanya was not completely satisfied. He wondered what more
could be done to make the new organizational structure deliver even better results, and help realize
the bank’s ambitious vision of becoming Nigeria’s bank of first choice.

Keywords
Corporate transformation, organizational structure, market orientation, strategic leadership,
organizational change management

Introduction
Our new organizational structure has seen us more effectively meet the demands of an increasingly competitive
and sophisticated operating environment. Our performance so far is evidence that our restructuring has generated
the results that we expected, and that our value propositions across the five SBUs are in sync with the needs of our
customers…As we continue to realize the benefits of this restructuring, our key challenge will be how to address
a number of critical enablers for sustained success and effective functioning of the new organizational structure.
  Stephen Onasanya, CEO, First Bank
(retrieved from company documents)

Stephen Onasanya walked back to his office after an interesting first-half 2012 financial results
conference call on 2 August 2012. A poster of the bank’s vision—to be the clear leader and Nigeria’s

The case has been developed solely as the basis for class discussion, for educational and management development
programmes and is not intended to illustrate either effective or ineffective handling of an administrative situation or
to present successful or unsuccessful managerial decision making or endorse the views of management in decision
making.
52 Ifedapo Adeleye

bank of first choice—caught his eyes, and got him wondering what more he could do to realize the
vision.
First Bank had posted impressive financial results for the first half of 2012. Profit before tax had
jumped 125 per cent to ₦54.1 billion ($349 million); cost-to-income ratio had reduced by 10 per cent to
just over 58 per cent, and there was a year-on-year increase of 17 per cent in net loans and advances to
customers (see Appendix 1). Onasanya had successfully steered First Bank through a three-year period
of accelerated corporate transformation and growth, as the institution emerged from the global financial
crisis of 2008.
At the core of the bank’s transformation lay a new organizational structure. In 2010 the bank had
transitioned from a geography-based to a customer-based organizational structure, and redesigned its
nationwide coverage/deployment model to align with the new organization. The restructuring, which
was initiated to increase market orientation and ensure tailored product design and delivery, was appar-
ently successful. Apart from the impressive financial results, significant progress had been made on
many non-financial measures, including customer satisfaction.
As Onasanya returned to his office after the conference call, he wondered what more could be done
to realize full value, and to institutionalize customer centricity through the new organization design.

The Evolution of First Bank: Since 1894

Headquartered in Lagos, Nigeria, First Bank had an international presence in the United Kingdom,
United Arab Emirates, France, China, South Africa and DR Congo in 2012. It was one of the largest and
most diversified financial institutions in the West Africa region, with subsidiaries involved in capital
market operations, insurance, investment banking and asset management, private equity/venture capital,
pension fund custody management, trusteeship, mortgage and microfinance banking. The bank’s 8100
associates provided services to over 7 million customers, through 717 business locations. The bank had
32.6 billion issued shares and over 1.3 million shareholders across the globe. Its brand essence of being
‘Dependably Dynamic’ was anchored on four pillars of success: leadership, safety and security, enter-
prise and service excellence.
Established in 1894, it is literally the first bank in Nigeria, and in the first years of its operations, it
was the only financial institution in the country. The bank was incorporated as a limited liability com-
pany under the name Bank of British West Africa, with a focus on financing international trade. In the
late 1890s, its first international branches were set up in in two neighbouring countries: Ghana and Sierra
Leone. By the time the bank changed its name to Bank of West Africa (BWA) in 1957, it had acquired a
reputation as a leading financial institution. In 1965, Standard Bank of South Africa acquired Bank of
West Africa and changed its name to Standard Bank of West Africa. Four years later, Standard Bank
Nigeria was incorporated locally to take over the business in Nigeria. Two indigenization decrees by the
Federal Government of Nigeria in the 1970s saw Standard Bank’s equity stake reduced to less than
40 per cent, culminating in the name change to First Bank of Nigeria in 1979.
The liberalization of banking licenses in the 1980s and 1990s led to an overcrowded sector, as the
number of banks more than quadrupled to over 100. This posed competitive challenges to First Bank, as
many of the newly established banks focused on the more profitable customer segments, and had much
more efficient operations. By the time the bank marked a century of operations in 1994, it was clear that

South Asian Journal of Business and Management Cases, 2, 1 (2013): 51–60

First Bank of Nigeria 53

there was an urgent need to modernize the bank. In 1996, a business transformation initiative, ‘Century
II’, was launched. Century II had three major objectives, which included modernizing the bank’s operat-
ing systems, strengthening the brand, and significantly improving customer experience.
First Bank went through another transformation initiative from 2001, ‘Century II—The New Frontier’,
which sought to consolidate on the gains of the earlier transformation programme. This happened at a
time when the industry was recovering from a major shakeup, as massive bank failures had reduced the
number of players from 126 to 77. In 2002, the bank made history again, establishing the first offshore
financial subsidiary of a Nigerian-owned bank in the United Kingdom.
Not long after these major transformation projects, the Central Bank of Nigeria announced a radical
recapitalization programme in 2004, aimed at strengthening the weak and overcrowded sector compris-
ing of 89 banks. The minimum paid up capital for banks was raised from N2 billion to N25 billion. By
2006, the structure and competitive dynamics of the industry had completely changed, following several
mergers and acquisitions, and capital raising activities. 25 banks emerged from the regulator-induced
consolidation, and the dominance of the historical ‘big four’ was seriously threatened. First Bank pre-
pared itself for the new competitive challenges, acquiring two banks—MBC International Bank and
FBN (Merchant Bankers)—in 2005, and floating Nigeria’s biggest public offer and the first ever hybrid
capital offering out of Africa in 2007. Although First Bank remained a strong player in the sector, its
leadership in many market segments was challenged by several competitors.

Stephen Onasanya Takes Charge

In June 2009, when Stephen Onasanya was appointed Group Managing Director and Chief Executive
Officer of First Bank, the Nigerian banking sector was experiencing significant turbulence. Onasanya
did not have much time to decide how to transform the bank, as his predecessor, Sanusi Lamido Sanusi,
had suddenly departed six months into his appointment to serve as Governor of the Central Bank of
Nigeria. Sanusi had initiated a corporate transformation programme, and now Onasanya had to ensure
that the transformation of the bank began in earnest.
Although it was a somewhat hasty transition, Onasanya was well-prepared to lead the bank through
the challenging period. Since joining the bank in 1994 as a senior manager, he had risen to the position
of Executive Director, Banking Operations and Services. He had also served in several critical roles,
including as CEO of First Pension Custodian Nigeria Limited, a subsidiary of the bank; Group Head,
Finance and Performance Management, and coordinator of the bank’s Century II Enterprise
Transformation Project.
Settling into the job was nevertheless challenging, as there was enormous turbulence in the industry
with the global financial crisis hitting many banks hard in 2009. The apex bank had to hurriedly arrange
N620 billion to rescue eight ailing banks, which were subsequently either acquired, nationalized or res-
cued through private capital injections. This challenging period, however, provided fresh opportunities
for First Bank, with its solid reputation as a stable financial institution.
In 2009, a new three-year strategic planning cycle was ushered in, with the aim of restoring the bank
to a position of clear leadership of the Nigerian financial services industry, and anchored on four strate-
gic themes: growth, service excellence, talent management and performance management. A 15-year

South Asian Journal of Business and Management Cases, 2, 1 (2013): 51–60

54 Ifedapo Adeleye

veteran of the bank, Onasanya knew that executing the strategy successfully required a strong market
orientation, and a transition towards a more customer-focused organizational structure.

First Bank’s Organizational Structure in 2009

First Bank’s organizational structure in 2009 was geography-based, with four strategic business units
(SBUs) or directorates covering four key regions: Lagos, North, South, and West. The sectors served by
each directorate varied. In the Lagos directorate, the commercial centre of Nigeria, the key economic
activities included telecommunications, aviation, shipping and ports, oil and gas (downstream), real
estate, commerce and industry, power, transportation, financial services and tourism. In the north direc-
torate, the focus was on the public sector, agriculture, mining and solid mineral extraction, and manufac-
turing, while the south directorate’s key market segments were oil and gas, public sector, and trading.
The west directorate serviced a wide range of sectors as well, including: administrative, extractive,
manufacturing, additive, agriculture, merchandising, public and services sectors.
Each of the four strategic business units/directorates, headed by an executive director, was organized
into about a dozen business development offices (BDO), headed by business development managers
(BDMs). Several branch offices were clustered under a BDO. Through the branches, each directorate
offered a wide range of services, from corporate banking services for large corporate customers; to retail
banking services to small-sized businesses; to consumer banking products to individual customers; and
a variety of services for government ministries, departments and agencies. The four geographic strategic
business units were supported by four strategic resource functions/directorates: the office of the Group
Managing Director/CEO, finance, risk management, and operations.

Aligning FBN with the Market: The Proposed

Organizational Structure
In 2009, we embarked on a programme to restore First Bank to clear leadership in the financial services industry.
As part of this programme, we plan to transition the bank to a new structure, centred around five strategic busi-
ness units delineated by customer segments rather than geography. The overriding objective of this exercise is to
re-align our business to focus on meeting specific customer needs. We believe that this will enable us to increase
our share of wallet and by extension market share, and also to improve profitability.
  Stephen Onasanya, CEO, First Bank

After decades of leadership and dominance in somewhat monopolistic and oligopolistic markets, First
Bank was faced with the challenge of operating in a hypercompetitive industry. As the Onasanya-led
executive management team set out to transform the bank, one of their top priorities was institutional-
izing customer centricity, and using it as a lever to regain market leadership. It became apparent that the
geography-based organizational structure which had worked well for so many years was now in urgent
need of change. After extensive deliberations, five customer segments were proposed: corporate bank-
ing, institutional banking, private banking, public sector and retail banking (see Figure 1).

South Asian Journal of Business and Management Cases, 2, 1 (2013): 51–60

First Bank of Nigeria 55

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Figure 1. First Bank’s Proposed Customer Segments

Source: Company documents.

There were four critical objectives of the proposed change to a customer-based organizational structure:

1. To realign the bank’s units to focus on meeting specific customer needs.

2. To fully leverage the bank’s capabilities and take advantage of all available opportunities to grow
the bank’s business.
3. To deepen understanding of every customer segment the banks operates in, and develop a value
proposition to enable enhanced customer acquisition, cross-selling and retention.
4. To deliver customer service excellence.

The new organizational structure would align First Bank with the market, with an executive director or
executive vice president leading each of the five strategic business units (SBUs). The five customer seg-
ments were carefully delineated. The corporate banking SBU would focus on midsize and large corporate
clients, private organizations with annual revenues above N500 million, and mid-size to large organizations
with annual revenues above N5 billion, but who have a key-man risk. The institutional banking group
would focus on multinationals and large corporate clients, well-structured organizations with annual reve-
nues more than N5 billion, firms quoted on the Nigerian Stock Exchange, multinational and multilateral
organizations, companies in specialized industries, and large non-governmental organizations.
The private banking group would focus on high net worth individuals with investible income of
at least N37.5 million, while the public sector group would service the federal government and its

South Asian Journal of Business and Management Cases, 2, 1 (2013): 51–60

56 Ifedapo Adeleye

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Figure 2. First Bank’s New Organizational Structure

Source: Company documents.

ministries, departments and agencies, state and federal tertiary institutions, the armed forces, police, civil
defence organizations and foreign embassies. The fifth SBU, the retail banking group would cater for
individual customers with annual income below N50 million, businesses with annual turnover below
N500 million and local governments.
The proposed changes also affected the business support functions. In place of the existing four direc-
torates/strategic resource functions, 15 new strategic resource functions would support the four SBUs,
namely: operations, finance, risk management, company secretary, strategy and corporate development,
legal services, human capital management, general services, marketing and corporate communications,
corporate transformation, project implementation, e-business, products and marketing support, informa-
tion technology, and internal audit (see Figure 2).
The branch operations model would also be reorganized, with the creation of centralized processing
centres (CPCs) to standardize the quality of service delivery across all branches, and improve opera-
tional efficiency. With this centralization of operations, a new reporting structure would take effect in the
branch operations function, with intermediate management to provide proper oversight to all branches.
Branch operations managers would now report to area operations managers, who would report to regional
operations managers, and ultimately to the office of the group head of operations. The branch operations
function would consequently be separated from the sales function at the branch level, to allow market-
facing managers at the branches focus solely on selling and relationship management activities.

Successful Implementation of the New Organizational Structure

After careful planning and deliberation, the new organizational structure was deployed in 2010, with a shift
from geography as the primary organizing axis to customer segments. Two years after the transition, it was

South Asian Journal of Business and Management Cases, 2, 1 (2013): 51–60

First Bank of Nigeria 57

Table 1. FBN’s KPMG Customer Satisfaction Survey Ranking

Year Retail Segment Ranking Corporate Segment Ranking

2010 12 10
2011 10  6
2012  8  3
Source: KPMG Bank Customer Satisfaction Surveys: 2010–2012.
Note: The survey comprises of 24 banks.

apparent that the restructuring was successful. The goal of becoming customer-centric was being realized
with segment specialization driving the identification and targeting of specific market segments. In 2011,
for instance, a new sub-segment was created within the retail banking SBU to provide a unique value
proposition and experience for affluent customers. The emerging corporates sub-segment was also created
within the corporate banking SBU to focus on properly servicing an identified gap in the lower end of the
corporate banking market segment, clients with annual revenues between ₦500 million and ₦2 billion. The
centralization of branch operations was also successful, as central processing centres provided more effi-
cient processing and enhanced service levels to over 60 per cent of the bank’s branches in early 2012.
The second area where the bank had made significant progress was in customer service excellence,
where there was a marked improvement in both internal and external customer satisfaction surveys. In
the widely respected KPMG Banking Industry Customer Satisfaction Survey, the bank had climbed from
12th in 2010, to 10th in 2011 and 8th in 2012 in the retail segment. The bank’s performance in the cor-
porate banking segment was even better: from 10th in 2010, to 6th in 2011, to 3rd in 2012 (see Table 1).
These improvements in customer centricity coincided with accelerated growth and impressive finan-
cial performance (see Appendix 1 and 2). Results for the first half of 2012 showed a 26 per cent growth
in gross earnings to N182.3 billion ($1.18 billion), a year-on-year increase of 17 per cent in net loans and
advances to customers, and a 125 per cent jump in profit before tax to N54.1 billion ($349 million).
Many analysts were confident that the bank would go on to achieve an industry historic milestone of
N100 billion in profit before tax at the end of the financial year.

Going Forward
Onasanya was however not completely satisfied. With competition intensifying in the banking sector, he
knew there was no room for complacency. Three specific issues occupied his mind:
First, how to further improve the customer engagement model in the various market segments, to
ensure that appropriate customer experience was delivered.
Second, how to build a ‘one-firm firm’ that really operates as one organization, with institutional
loyalty and group effort. He was particularly concerned about preventing some possible unintended
consequences of the new strategy and structure, such as inter-divisional rivalries, fiefdoms and silos,
from emerging.
Third, how to deploy infrastructure and a culture that supports effective cross-selling, particularly
among frontline bankers and senior business managers.
Onasanya wondered what more could be done to make the new organizational structure deliver even
better results, and help realize the bank’s ambitious vision of becoming Nigeria’s bank of first choice.

South Asian Journal of Business and Management Cases, 2, 1 (2013): 51–60

58 Ifedapo Adeleye

Appendix 1. Press Release: 2012 Half-year Performance Highlights

NSE: FIRSTBAN Bloomberg: FIRSTBAN NL Reuters: FBNP.LG

Lagos, 24 July 2012

FIRST BANK OF NIGERIA REPORTS 125% RISE IN PROFIT BEFORE TAX FOR THE SIX
MONTHS ENDED 30 JUNE 2012
First Bank of Nigeria Plc (“First Bank” or the “Group”) today announces its unaudited IFRS compliant results for
the half year ended June 2012.

Key Highlights for the period ended June 2012:

• 26% growth in gross earnings to N182.3 billion (H1 2011: N145.1 billion)
• Net interest margin of 8.3% (H1 2011: 8.4%)
• 48% growth in non-interest income to N44.5 billion (H1 2011: N30.1 billion)
• 21% growth in operating income to N153.3 billion (H1 2011: N126.3 billion)
• 125% rise in profit before tax to N54.1 billion (H1 2011: N24.1 billion)
• Cost to income ratio of 58.3% (H1 2011: 69.3%)
• Impairment charge for credit losses of N9.1 billion (H1 2011: N14.4 billion)
• Year-on-year increase of 17% in net loans and advances to customers to N1.5 trillion (H1 2011: N1.2 trillion)
and year to date growth of 17% (Dec 2011: N1.3 trillion)
• Year-on-year deposit growth of 15% to N2.2 trillion (H1 2011: N1.9 trillion) and year-to-date growth of 13%
(Dec 2011: N2 trillion)
• NPL ratio of 3.3% (H1 2011: 4.0%)
• 56.3% liquidity ratio (H1 2011: 71.2%)
Source: Company documents.

Appendix 2. Bank Financial Summary (2009–2011)

Balance sheet
31 Dec 2011 31 Dec 2010 31 Dec 2009
N million N million N million
Assets  
Cash and balances with Central Bank 199,227 75,517 70,332
Treasury bills 187,457 23,769 14,219
Due from other banks 404,959 550,414 514,193
Loans and advances to customers 1,235,615 1,127,900 1,061,805
Advances under finance lease 4,642 7,581 10,835
Insurance receivables 111 – –
Investment and trading securities 572,853 337,181 278,624
Investment in associates 8,209 9,716 13,373
(Appendix 2 continued)

South Asian Journal of Business and Management Cases, 2, 1 (2013): 51–60

First Bank of Nigeria 59

31 Dec 2011 31 Dec 2010 31 Dec 2009

N million N million N million
Investment in subsidiaries 5,503 1,000 –
Managed funds 21 37,917 84,630
Other assets 141,274 63,558 69,286
Investment property 10,708 10,326 8,466
Deferred tax asset 10,617 5,315 –
Intangible asset 1,006 494 –
Property and equipment 57,171 53,998 47,987
  2,839,373 2,304,686 2,173,750
Financed by      
Share capital 16,316 16,316 14,504
Reserves 348,205 321,741 296,497
Non–controlling interest 964 1,148 3,081
Customer deposits 1,947,803 1,450,095 1,342,704
Due to other banks 181,892 148,286 173,280
Liability on investment contracts 39,104 95,352 148,224
Liability on insurance contracts 824 – –
Borrowings 93,284 124,872 35,729
Current income tax 23,844 20,051 19,635
Other liabilities 178,443 121,026 128,760
Deferred income tax liabilities 1,067 901 10,612
Retirement benefit obligations 7,627 4,898 724
  2,839,373 2,304,686 2,173,750
Acceptances and guarantees 1,546,197 1,022,950 972,601
Profit and loss account    
Gross earnings 296,329 232,079 193,932
Net operating income 259,234 178,062 127,662
Operating expenses –147,358 –119,274 –77,574
Group’s share of associate’s results –1,507 –3,657 114
Diminution in asset values – – –
Provision for losses –44,814 –21,590 –38,174
Profit before taxation 65,555 33,541 12,028
Exceptional items –15,489 226 –
Taxation –5,281 –4,590 –8,406
  44,785 29,177 3,622
Non–controlling interest 884 1,933 1,010
To shareholders 45,669 31,110 4,632
Earnings per share (basic) – kobo 140 95 16
Source: First Bank of Nigeria, 2011 Annual Reports and Accounts.

Acknowledgements
The author wishes to thank the First Bank of Nigeria for their assistance in research and permission in developing
the original version of the case, titled‘Corporate Transformation and Restructuring at First Bank of Nigeria: From
Geography to Markets’, which forms the basis of the present case. The author would like to thank the participants

South Asian Journal of Business and Management Cases, 2, 1 (2013): 51–60

 60 Ifedapo Adeleye

of the International Conference on Management Cases 2012 held on 29–30 November at the Birla Institute of
Management Technology, Greater Noida, India, for their constructive comments on a previous version of this paper.

Note
1. Ifedapo Adeleye has developed this case as revised and updated version of his case titled ‘Corporate
Transformation and Restructuring at First Bank of Nigeria: From Geography to Markets’ presented at the
International Conference on Management Cases (ICMC 2012) held on 29–30 November 2012 at the Bimtech
Campus, Greater Noida, India.

Ifedapo Adeleye is a Senior Lecturer in Strategy and HRM at Lagos Business School. A passionate
management educator, he enjoys teaching with, as well as developing management cases. He is a recipi-
ent of the BIMTECH–Stough Young Scholar Award for ‘Best Paper’ contributed at International
Conference on Management Cases (ICMC 2012). Dr Adeleye’s research engagements revolve around
three areas: strategy practice and execution, performance and reward management, and inter-
national business and management. He received his PhD from Manchester Business School, UK.
[E-mail: iadeleye@lbs.edu.ng]

South Asian Journal of Business and Management Cases, 2, 1 (2013): 51–60

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