First Bank Recovers N456bn Loan from Heritage Bank

FIRST Bank has successfully retrieved the full repayment of a N456 billion loan granted to Heritage Bank, marking a significant milestone in the bank's recovery efforts.

The loan was part of a bailout package structured during the tenure of former CBN Governor Godwin Emefiele. According to sources within First Bank, the CBN credited the bank with the full amount before revoking Heritage Bank's license, preventing a substantial impairment charge for First Bank.

The CBN announced the revocation of Heritage Bank's license on Monday, citing ongoing financial distress and a lack of reasonable prospects for recovery, leading to the bank's collapse. First Bank received a total of N456 billion, bringing an end to a seven-year period since First Bank assisted Heritage Bank in clearing its debts.

As of the first quarter ending March 2024, First Bank held balances with other banks totaling N688 billion, a decrease from N735 billion in December 2023. These balances comprise clearing balances held with other deposit money banks, with First Bank offering clearing services for select banks in Nigeria.

Efforts to recover the N456 billion loan intensified as Heritage Bank's financial situation deteriorated over the years. However, a resolution was not achieved until a new board and management took control of the bank's holding company earlier this year. The sum was ultimately credited to First Bank before the official announcement of Heritage Bank's license revocation, concluding the seven-year recovery process.

The expected inclusion of this payment in FBN Holdings' half-year financial reports is likely to boost its cash reserves and eliminate the need for loan write-offs.

In the first quarter of 2024, FBN Holdings reported a pre-tax profit of N358.8 billion and an impairment provision of N227.4 billion, indicating a significant improvement in its financial performance.

Heritage Bank faced severe financial difficulties starting in 2019, teetering on the brink of collapse. However, under Godwin Emefiele's leadership, the CBN implemented a policy to prevent bank failures and provided support to Heritage Bank through various measures, including approval for First Bank to assist with clearing obligations.

The CBN issued a Letter of Comfort to First Bank, guaranteeing loan repayment and alleviating the need for substantial provisions. Auditors had previously urged for a provision for the loan, but this request was waived due to the CBN's guarantee.

This successful loan recovery marks a significant financial achievement for First Bank, highlighting effective financial management and prompt regulatory intervention to maintain stability in Nigeria's banking sector.

According to Heritage Bank's 2021 audited financial statement, the bank had a negative reserve of N230.8 billion and a share capital of only N53.9 billion, with accumulated losses amounting to N459.3 billion, rendering it technically insolvent.

As of 2021, Heritage Bank's financial records revealed a significant outstanding balance of N247 billion owed to banks in Nigeria, with First Bank being the sole creditor.

It is important to note that the recently paid amount of N456 billion to First Bank likely encompasses accumulated interests, indicating a substantial increase from the initial debt.

Heritage Bank has yet to publicly disclose its financial statements for the years 2022 and 2023, leaving a gap in transparency and accountability.