Recapitalisation: 7 Listed Banks Outline Funding Plans

With the April 30 2024 deadline for banks in the country to lay out their recapitalisation plans before the Central Bank of Nigeria (CBN) now past, no fewer than seven of the listed banks have concluded on their recapitalization plans and have made the plans public.

Zenith bank, Access Holdings, FCMB Plc, Stanbic IBTC Holdings, GTCO, United Bank for Africa, Fidelity Bank are amongst those who have made their recapitalization plans public. FBN Holdings which had planned to raise N300 billion is yet to get shareholders approval after it cancelled its Extraordinary General Meeting, whilst sources within Unity Bank told Leadership that the bank will meet the submission deadline.

The CBN had in March raised the capital requirement of banks in the country, giving them a two year period to meet the capital base or explore other options such as mergers/acquisitions or downgrading of banking licences.

According to the new requirement, commercial banks with international licences are required to have a capital base of N500 billion while their national and regional counterparts are required to have capital base of N200 billion and N50 billion respectively.

Similarly, the capital base of national non-interest banks were raised to N20 billion while that of regional non-interest was raised to N10 billion. Merchant banks capital base was also raised to N50 billion.

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Although the new capital requirement becomes effective in 2026, the CBN had required that banks submit step-by-step activities, transactional details, instruments and other options for their recapitalisation to the apex bank not later than April 30. The plans will cover the two-year compliance period ending March 31, 2026.

Consequently, banks in the country had begun seeking shareholders approval to restructure and raise fresh capital. Mostly, the big banks have been able to give a clear direction on their path to recapitalisation with Access Holdings, the parent body of Access Bank, getting shareholders approval to raise additional capital through a N365 billion rights issue.

Similarly, GTCO revealed that it would be seeking shareholders’ approval to raise $750 million.

According to the holding company, the fund would be raised “through the issuance of securities comprising ordinary shares, preference shares, convertible and/or non-convertible notes, bonds or any other instruments, in the Nigerian and/or international capital markets, either as a standalone issue(s) or by the establishment of capital raising programme(s), whether by way of public offerings, private placements, rights issues and/or other transaction modes, at price(s), coupon or interest rates determined through book building or any other acceptable valuation method or combination of methods, in such tranches, series or proportions, within such maturity periods and at such dates and upon such terms and conditions as may be determined by the board of directors of the Company (the Board), subject to obtaining the requisite approvals of the relevant regulatory authorities.”

For United Bank for Africa, its group managing director and chief executive officer, Oliver Alawuba, had mentioned that the capital raising “strategy may include a combination of options such as Rights Issue or Private Placement. The fact remains that we are confident in our ability to meet the CBN’s capital adequacy requirements and will keep investors informed as we progress.

The banking group is looking at raising about $200 million from the international capital market and raising another round of funding from the local market for an amount yet to be specified.

At its last investor call, the managing director of Fidelity Bank, Nneka Onyeali-Ikpe, had revealed that the bank would be raising additional capital in three phases. According to her, the management of the bank plans to raise funds through a public offer and rights issue after which it will raise additional capital through private placements.

She noted that in the event of a shortfall in the needed fund to meet the capital requirement, the bank will run a second phase of public offer and rights issue. All these she said is to be concluded before the March 31, 2026 deadline given by the CBN.

For FCMB Group Plc, the board had approved a roadmap for the recapitalisation of the group’s commercial banking subsidiary-FCMB Limited, which includes raising equity capital to ensure FCMB Limited meets the new minimum capital base of N200 billion for its national commercial banking licence category.

Stanbic IBTC Holdings Plc has launched a N550 billion capital raising process, including a rights issue of N150 billion and a N400 billion debt capital raising. Shareholders of the company will meet next month to authorise the board “to raise additional equity capital of up to N150 billion by way of a rights issue or offer for subscription on such terms, tranches, conditions and dates as may be determined by the directors”.

Zenith Bank, which needs the least among its peers, had last weekend gotten shareholders approval to restructure. The bank had rounded off conversion to holding company structure, creating new 34 billion ordinary shares of 50 kobo each for a multi-layered capital raising process that could see the bank with nearly N1 trillion.

Sources in the industry note that a significant portion of banks are planning to pursue equity capital raising, with the preferred initial option among existing major investors a rights issue, as they aim to safeguard their controlling interests. There was relatively little consideration given to the dividend conversion option, which is an existing practice allowing shareholders to opt for converting their cash dividends into equities, pending regulatory approval.

According to Fitch Ratings small banks might struggle to meet the new threshold. “Some small and medium-sized banks may struggle to raise the necessary capital, leading to increased M&A. This would result in a more concentrated banking sector, with higher barriers to entry, greater economies of scale and stronger long-term profitability.”

Meanwhile, for merchant banks in the country, industry watchers say they expect a change in the operations of most of them from merchant banking to regional commercial banking. The capital requirement for regional commercial banks and merchant banks have been fixed at N50 billion each.