Does First Bank’s N748bn confession signal the end of audit credibility in Nigerian banking?

By: Chidozie Nwali

As the primary external auditor for First Bank Nigeria Holdings (FBNH), KPMG Professional Services now finds itself in the crosshairs of a brewing corporate scandal. The numbers—a N748.1 billion impairment charge and a N407.8 billion loss—are not just a management failure. They are a direct challenge to the credibility of the “clean” audit opinions issued by KPMG in the years leading up to this confession.

Last Saturday, Femi Otedola, Group chairman of FBNH, admitted that the company lost 92% of its 2025 profit to bad loans. However, a look at FBNH 2025 unaudited financial records shows most of the bad loans were only discovered in the 4th quarter of 2025.

“At First HoldCo we decided to clean house properly. We took a huge one time hit of ₦748 billion to admit old bad loans instead of pretending they do not exist.” Otedola expressed in a series of posts on X (formerly Twitter).

The Quarter-Four “Dump”: A Forensic Red Flag

Over 60% of the bad loans, a staggering N459.2 billion were discovered only in the last quarter of the year, making the timing of the confession the most damning evidence in the audit process.

Banking experts agree: you do not wake up and discover three-quarters of a trillion naira in bad debt overnight. Loans deteriorate over cycles, yet FBNH has sailed through recent audits with “unqualified” opinions.

This “Fourth Quarter Dump” suggests that KPMG may have accepted management’s optimistic valuations of collateral and repayment capacity that have now been proven hollow.

The Sector-Wide Disconnect

The gravity of the FBNH “confession” becomes undeniable when compared to the broader Tier-1 banking sector. While the industry average for Non-Performing Loans (NPL) hovered around a manageable 4.5% to 5% for major players, FBNH’s ratio surged to a staggering 12.9%, effectively triple the 4.07% reported by GTCO and nearly three times Zenith Bank’s 4.2%.

While Access Holdings and Zenith Bank maintained impairment charges in the range of N150 billion to N230 billion, FBNH’s N748.1 billion charge stands as a massive outlier.

This divergence suggests that while peers were progressively managing defaults, FBNH was potentially deferring the inevitable, all while maintaining a dividend-paying facade that has now been abruptly suspended.

Despite the loss, Otedola boasted that  the company is now moving forward “stronger” after clearing the bad loans at the expense of its shareholders.

The Personnel and “Other” Expense Black Hole

The audit credibility gap widens when looking at the income statement. While shareholders absorbed a N407.8bn loss, the company’s personnel expenses skyrocketed to N385.9bn (nearly 4 times the previous year).

According to the FBNH financial report, “Other Operating Expenses” consumed N809.4 billion, a nearly 600% increase from previous year.

In a credible audit environment, a “miscellaneous” bucket of this size is a red flag. It could contain legal settlements, related-party write-offs, or deferred losses from previous years that should have been recognized under KPMG’s watch in 2023 or 2024.

If auditors cannot (or will not) force a piece by piece breakdown of nearly a trillion naira in “other” costs, the audit itself becomes a legal formality rather than a shareholder safeguard.

KPMG has been the company’s Auditor for close to a decade, with a change in sight, as regulatory limits auditing firms to 10 years. KPMG has been FBNH auditors since 2016, with their contracts expected to end this year.

Advertising takes 25%

Another mismanagement is the N185 billion spent on advertising. While the bank was burning capital and heading toward a N407.8bn loss, it allocated over 25% of its operating budget to image-making, while its peers allocated just 5%.

An auditor’s job is to ensure that “Going Concern” assumptions are valid and that management is acting with prudence. When a bank prioritizes billboards over the balance sheet—and the auditor remains silent—trust is the first casualty.

If KPMG’s final 2025 audit report mirrors these unaudited numbers, it will be a tacit admission that their reports for 2022, 2023, and 2024 were materially disconnected from the bank’s true economic health.

In those years, KPMG certified that the financial statements gave a “true and fair view.” Today, N748 billion says otherwise.