Banks in N400b recapitalisation drive at stock market

Taofik Salako, Deputy Business Editor

The Nigerian banking industry appears set for a new race for recapitalisation. Some banks are repositioning ahead of emerging changes in national and global financial structures.

The first set of fund-raising banks are expecting to raise not less than N400 billion from the capital market.

This is the first time that many banks are having a cluster of offers since the 2005-2008 banking recapitalisation, which saw the largest group fundraising in the history of the capital market.

Finance experts were unanimous that the banks are being proactive by beefing up their primary equity capital base, otherwise known as Tier 1 capital, in order to forestall any possible negative backlash from recent policy changes and emerging challenges in the operating environment.

They said that banks might also be taking advantage of favourable capital market situation to foster their strategic growth plans, with most banks racing to invest in technology and digital start-ups, as Nigerian public becomes increasingly attracted to digitized systems.

The experts said while there were no immediate strong indication that the Central Bank of Nigeria (CBN) may order a general recapitalisation like the ‘Chukwuma Soludo era’, recent circulars from the apex bank suggest the need for banks to solidify their capital bases.

One-time CBN Governor (now Anambra State Governor) Prof Chukwuma Soludo, had raised new minimum capital base for banks alongside other changes, a move that triggered unprecedented fund raising by banks and reduced the number of banks to less than one third.

Nigeria’s oldest financial services group, FBN Holdings Plc, yesterday submitted request for approval to raise N139 billion in new equity funds.

FBN Holdings is the holding company for First Bank of Nigeria (FBN) and its former subsidiaries.

Three other banks – Wema, Fidelity and Jaiz – are also seeking approval to raise more than N135 billion in separate offer proposals.

The structure of most of the offers include provisions for oversubscription, which allow the banks to allot additional shares and raise funds beyond the initial offer sizes.

Market analysts projected that the first set of fund-raising banks could raise more than N400 billion, from existing shareholders and new investors.

FBN Holdings plans to float a rights issue of 8.974 billion ordinary shares of 50 kobo each and at offer price of N15.50 per share.

The rights issue will be pre-allotted to shareholders on the register of the company as at close of business yesterday, on the basis of one new ordinary share of 50 kobo each for every four ordinary shares of 50 kobo each held.

Nigeria’s premier and largest non-interest bank, Jaiz Bank is undertaking a rights issue of about 5.41 billion ordinary shares of 50 kobo each at offer price of N1 per share, representing initial offer size of N5.4 billion. The rights issue will be pre-allotted on the basis of 87 new ordinary shares for every 250 ordinary shares held as at the close of business on October 6.

Also, Nigeria’s oldest surviving indigenous bank, Wema Bank Plc, is completing arrangements for a rights issue of about N40 billion. Wema Bank will issue 8.572 billion ordinary shares of 50 kobo each at N4.66 per share to all shareholders on its register as at close of business on Thursday, September 28, 2023.

The rights will be pre-allotted on the basis of two new ordinary shares for every three shares held as at September 28.

Fidelity Bank Plc had launched a hybrid capital raising plan aimed at sourcing some N90 billion in new equity funds from existing and new shareholders. The bank plans to issue 13.2 billion ordinary shares of 50 kobo each to new and existing investors to boost its capital base.

Under the plan, the bank is seeking to float a public offer of 10 billion shares and a rights issue of 3.2 billion shares. The rights issue will be allotted on the basis of one new share for every 10 shares held.

Managing Director, Arthur Steven Asset Management, Mr. Olatunde Amolegbe, said while banks generally may easily refer to their business expansion plans, the banks might also be hedging against medium-term risks and the unfolding dynamics in the operating environment.

The Nation Newspaper