- FBNH, GTCO, Access Corp target N1.17trn
- Zenith, UBA yet to declare targets
- Wema Bank secures N40bn, eyes additional N150bn
- Fidelity Bank to raise N127bn
- KPMG predicts Mergers, Acquisitions
The race to achieve the new capital requirements of the Central Bank of Nigeria has begun as banks in the Nigerian banking industry have unveiled calculated moves to beat the March 31, 2026 deadline, investigations by The Point have revealed.
According to our findings, Wema Bank, a regional bank has raised N40 billion from its existing shareholders while Fidelity, a Tier-2 bank is canvassing its shareholders to raise N127 billion.
Financial experts insisted that banks that are still willing to continue with the business of lending to customers in Nigeria have until March 31, 2026 to comply with the new capital base structure of the CBN, the highest regulatory authority of Nigeria’s financial industry.
Investigations by The Point revealed that the banks are not leaving things to chance as the big names in the industry have unveiled their plans to meet the new capital requirement while a few have already hit the market, raising some sizable cash from their shareholders.
It was gathered that Wema Bank was the first to successfully raise N40 billion from its shareholders through a Right Issue while Fidelity, a tier-2 bank is through a Right Offer seeking about N127 billion from its existing shareholders.
Also, Tier 1 lenders, FBN Holdings Plc, GTCO Plc and Access Corporation Plc have unveiled plans to raise over N1.17 trillion from both local and foreign sources to boost their capital.
“Wema Bank flagged off the target with the N40bn rights issue which has now been approved by the CBN and the Securities and Exchange Commission”
Meanwhile UBA Plc and Zenith Bank Plc have not openly declared the amount that they are to raise from the markets though they have received shareholders’ approval to increase their capital base.
Information released by UBA Plc showed that shareholders approved increasing the bank’s issued share capital from N17. 099 billion to N22. 5 billion by creating 10.8 billion new ordinary shares.
The board was also authorized to cancel unallotted shares and raise additional capital through various instruments in both Nigerian and international markets.
Likewise at its Annual General Meeting in April, shareholders of Zenith Bank approved plans by the board of the tier-one lender to establish a capital raising programme.
They also increased the bank’s issued share capital, bringing the total issued shares of the bank to N62.7 billion.
HOW THEY STAND
Wema Bank secures N40bn, eyes additional N150bn
It was gathered that Wema Bank has successfully concluded the first tranche of its recapitalization exercise having secured all relevant regulatory approvals for the allotment of its N40billion Rights Issue initiated in December 2023.
Consequently, Wema Bank flagged off the target with the N40bn rights issue which has now been approved by the CBN and the Securities and Exchange Commission.
In a statement, Wema Bank’s Managing Director/CEO, Moruf Oseni, reiterated the Bank’s resolve in retaining its Commercial Banking license with National Authorization, adding that the N40bn Rights Issue is a step in that direction.
He stated, “We are delighted to announce the conclusion of the 1st tranche of our Capital Raise Programme, after obtaining the relevant approvals of all regulatory authorities. Our move to commence our Capital Raise Programme very early demonstrates our push for excellence and with a strong emphasis on our digital play; we are set to amass more successes in the coming months.
“We were impressed by the vote of confidence given by our shareholders during the 1st Rights Issue exercise as our shares were fully subscribed. In addition, we obtained the approval of shareholders at our 2023 Annual General Meeting (AGM) to raise an additional N150 billion to meet the capitalization threshold set by the CBN. The process is expected to be completed within 12-18 months. We are committed to providing optimum returns for every stakeholder and the successful conclusion of this N40bn Rights Issue is a bold step in the right direction.”
In addition to the upward trend in the Bank’s financial performance and the success recorded so far in its recapitalization exercise, Wema Bank’s corporate rating was recently upgraded to BBB+ by Pan African credit rating agency, Agusto and Co, and retained at BBB by international rating agency, Fitch.
Over the medium to long term, Wema Bank is positioned to not only dominate the digital Banking space but also the Nigerian financial services industry at large as it translates its industry leadership to significant market share.
Fidelity Bank seeks N127bn
Fidelity Bank Plc has opened application lists for its N127.2 billion combined rights and public offer, in the first capital raising under the banking recapitalization.
Fidelity Bank is offering a rights issue of 3.2 billion ordinary shares of 50 kobo each at N9.25 per share.
The bank is also simultaneously offering 10 billion ordinary shares of 50 kobo each to the general investing public at N9.75 per share.
The acceptance and application lists for the rights issue and public offer, which opened on June 20, 2024, are scheduled to close on Monday, July 29, 2024.
The rights issue has been pre-allotted on the basis of one new ordinary share for every 10 existing ordinary shares held as of the close of business on Friday, January 5, 2024.
The combined offer is a part of the bank’s strategy to increase its share capital base in compliance with the revised minimum capital requirements for Nigerian commercial banks introduced by the CBN on March 28, 2024.
It was gathered that the bank expects the additional equity capital to support its efforts to drive sustained growth and diversification of its earnings base.
The bank’s shareholders had already approved the rights issue and public offer at the extraordinary general meeting held in August 2023.
The Managing Director, Fidelity Bank Plc, Nneka Onyeali-Ikpe, said the net proceeds of the combined offer would be applied towards investment in information technology infrastructure, business and regional expansion, and investment in product distribution channels.
With more than 397,000 shareholders, Fidelity Bank’s shares are widely held with no shareholder holding five percent or more of the bank’s issued share capital.
The bank has a history of successful capital raising.
It had in 2013 raised $300 million in its inaugural Eurobond. It followed this with an N30 billion unsecured domestic corporate bond in 2015.
In 2017, Fidelity Bank issued another Eurobond, raising $400 million. Under a 10-year Tier II domestic corporate bond, the bank raised N41.2 billion in 2021 and also another $400 million Eurobond the same year. The bank successfully raised N13.97 billion in new equity funds through a private placement.
Stanbic IBTC Capital is the lead issuing house to the combined offer. The joint issuing houses include Iron Global Markets Limited, Cowry Asset Management Limited, Afrinvest Capital Limited, FSL Securities Limited, Futureview Financial Services Limited, Iroko Capital Market Advisory Limited, Kairos Capital Limited and Planet Capital Limited.
A recent review has shown that Fidelity Bank outperformed all major market indices for measuring returns at the Nigerian stock market, with the bank’s average annual return over the past five years twice the average return by the overall market and almost four times of average return in the banking sector.
GTCO eyes N500bn
The Point also gathered that Guaranty Trust Holding Company Plc has concluded plans to raise about N500 billion starting in July.
This was disclosed in a notice of its preliminary prospectus filed with the Securities and Exchange Commission.
The numbers of shares and the price range for the offering have yet to be disclosed.
On the use of the proceeds of the offer, GTCO said, “The net proceeds of the proposed offering will be used for (i) the growth and expansion of the GTCO Plc Group businesses. Such planned growth and expansion will be effected through investment in technology infrastructure to fortify existing operations, the establishment of new subsidiaries and selective acquisition of non-banking businesses; and (ii) the recapitalisation of Guaranty Trust Bank Limited (GTBank Nigeria).”
Regarding its target investors, the group said the proposed offering was structured as an institution offering targeted at eligible investors and for retail offerings within Nigeria. For the international market, institutional investors would be targeted via private placements.
Earlier in the year, GTCO indicated plans to raise $750m in capital, following the announcement of new capital requirements for banks by the Central Bank of Nigeria.
Guaranty Trust Holding said it could issue shares or bonds in Nigeria or internationally to raise the funds.
The group added that the filing of its preliminary prospectus was undertaken with a concurrent filing of a preliminary universal shelf registration statement, permitting it to establish a multi-currency securities issuance programme, “To issue various types of securities, or any combination of such securities, in one or more offerings, from time to time, to raise proceeds in an aggregate amount of up to $750m (or equivalent amount in Nigerian Naira) in the Nigerian/international capital markets during the validity period of the Programme.”
Access Corporation targets N365bn
The shareholders of Access Holdings Plc at the 2nd Annual General Meeting held on April 19, 2024, unanimously backed the Group’s plan to establish a capital raising programme of up to $1.5 billion as well as the subset initiative to raise up to N365 billion, specifically, through a Rights Issue of ordinary shares to its shareholders.
The proceeds of the Rights Issue would be used to support on-going working capital needs, including organic growth funding for its banking and other non-banking subsidiaries.
Shareholders of Access Corporation are confident that the emergence of Aigboje Aig-Imoukhuede as Chairman will aid its recapitalization bid.
“His proven track record, experience, and strategic insights position him as the ideal leader to steer Access Holdings towards meeting its lofty targets. During his tenure as CEO, particularly during the recapitalization directive by the CBN, he steered Access Bank to raise an impressive $2 billion in capital, and this demonstrates his capacity to, once again, lead Access Holdings towards successfully achieving the objectives of our planned Capital Raise and Rights Issue targets,” said the Chairman Emeritus of the Independent Shareholders Association of Nigeria, Sunny Nwosu.
FBN Holding seeks approval for N300bn
Meanwhile, FBN Holdings has disclosed that it will be seeking shareholders’ approval to raise N300 billion additional capital.
According to the notice, shareholders would consider and vote on the special business “that the company be and is hereby authorized to undertake a capital raise of up to N300, 000,000,000.00 (three hundred billion naira)”.
“The capital raise transaction shall be by the issuance of shares via a public offering, private placement, rights issue in the Nigerian or international capital markets, at price(s) to be determined by way of a book building process or any other valuation method or combination of methods, in such tranches, series or proportions and at such periods or dates, coupon or interest rates, within such maturity periods and upon such other terms and conditions as may be determined by the board of directors (the “directors”), subject to obtaining the approvals of the relevant regulatory authorities,” it stated.
Last October, FBN Holdings Plc sought approval from the NGX to raise N139bn in additional capital through a rights issue.
Ahead of its 11th annual general meeting in July, the financial institution had revealed plans to raise capital by way of a rights issue for future expansion projects.
UBA shareholders approve capital raise plan
For the United Bank for Africa Plc, its shareholders have unanimously approved the bank’s capital raise drive.
The shareholders authorized the board of directors of the bank to raise additional capital through the issuance of securities comprising ordinary shares, preference shares, bonds or any other instruments in the Nigerian and or international capital market.
They said the additional capital raise could be through public offering, private placements and rights issues.
The Chairman, Board of Directors of UBA Plc, Tony Elumelu assured shareholders that the bank would meet up and even surpass the recapitalization deadline.
KPMG predicts Mergers, Acquisitions
Analysts at KPMG anticipate that the move by the CBN will enhance the stability and capacity of the banking industry as well as attract greater investments to the sector.
Partner & Head, Strategy and Markets, KPMG Nigeria, Segun Sowande, noted that available data suggests a significant capital shortfall of N4.2 trillion across all license categories, with available options for banks including capital raise (as much as between 35% – 90% of the new minimum capital); mergers and/or acquisitions; and the downgrade of license authorizations.
“We recommend a proactive monitoring of market dynamics to identify and address any systemic risks or disruptions that may arise during the recapitalization phase to preserve the stability of the financial system,” he said.
“Several options are available to banks in their effort to raise additional capital, a route we anticipate to be the first line of action for most banks in achieving the new capital requirement, and these include public offerings, rights issues, and private placements”
Analyzing the recapitalization programme, he said, “Increase in capital requirement by the CBN is aimed at strengthening the resilience of the banking industry to withstand challenges arising from global and domestic headwinds. The higher capital requirement will enhance financial system stability as banks become better positioned to absorb financial shocks or unexpected losses.
“In addition, the upward adjustment will help boost investor confidence, notably reducing the number of deposit money banks in the country from 89 to 25. Consequently, banks were better positioned for financial intermediation to support economic growth and development. Bank credits to the private sector as a ratio of GDP rose to as high as 19.6% in 2009 when banks were allowed to operate as regional, national and international banks while market capitalization increased to about $85bn in the immediate periods following the last bank recapitalization in 2004.
“With the current reform agenda, the stringent definition of minimum capital which has left significant reserves unavailable for capitalization, is driving a widespread impact on the banking industry with changes to the competitive landscape expected as fallout. The capital shortfall for banks ranges between 35% to 90% of the new minimum capital requirement, with an estimated total capital shortfall in the banking system as investors tend to perceive well capitalized banking systems as being ‘too big to fall.”
Data from KPMG showed that the last banking sector reform introduced by the CBN in 2004 led to a significant 1,150 percent increase in the minimum capital requirement for banks, from N2 billion to N25 billion.
The reform was marked by extensive M&As, leading to an increase of about N4.2 trillion across the entire industry.
“Several options are available to banks in their effort to raise additional capital, a route we anticipate to be the first line of action for most banks in achieving the new capital requirement, and these include public offerings, rights issues, and private placements.
“However, consideration for potentially value accreting mergers and acquisitions as an alternative option may prove invaluable for players who adopt a broad-based approach to the reform. In conclusion, we welcome the recapitalization of banks with optimism as it is necessary to enhance the resilience of the banking system and support the growth agenda of the economy through greater financial intermediation.
“However, we recommend a proactive monitoring of market dynamics to identify and address any systemic risks or disruptions that may arise during the recapitalization phase to preserve the stability of the financial system,” Sowande said.
CBN’s declaration
The apex bank in a circular signed by the Director, Financial Policy and Regulatory Department, Haruna Mustafa on March 28, 2024, said the banking sector recapitalization programme is a regulatory initiative of the Central Bank of Nigeria that requires banks to increase their minimum paid-in common equity capital to a specified amount according to their license category and authorization within a specified period of time.
“The Programme became necessary to further strengthen Nigerian banks against external and domestic shocks as well as enhance the stability of the financial system. By increasing the minimum capital requirements, the CBN aims to ensure banks have a robust capital base to absorb unexpected losses and capacity to contribute to the growth and development of the Nigerian economy.
“The broad objective of the Programme is to engender the emergence of stronger, healthier and more resilient banks to support the achievement of a US$1 trillion economy by the year 2030. Bigger banks with larger capital bases and capacity can underwrite larger levels of credit which is critical to lubricate and catalyze the growth of the economy,” CBN noted.
The programme, according to the Bank, shall apply to commercial, merchant, and noninterest banks. The goal is to ensure that each institution maintains adequate capital that is commensurate with the risk profile, scale and scope of its operations.
