Five major banks rush to raise N1.26 trillion in fear of CBN sanction

• Major Nigerian banks have started making moves to align with the recapitalisation push by the Central Bank of Nigeria
• Some of the banks have taken to the capital market to pursue fundraising drives through rights issues and public offer
• The CBN had a few months ago announced various capital bases different tiers of banks need to meet to maintain their banking licenses

Legit.ng journalist Victor Enengedi has over a decade's experience covering Energy, MSMEs, Technology and the stock market.

Leading banks are set to generate N1.26 trillion in the capital market to comply with the recapitalisation requirements established by the Central Bank of Nigeria (CBN).

It would be recalled that in March 2024, the minimum capital base required by banks operating in Nigeria was reviewed upwards by the CBN.

Zenith, Access, 3 Other Banks in Race to Raise N1.26tn Ahead of CBN's Recapitalisation Deadline
Source: UGC

The CBN had mandated that banks meet the minimum capital requirement within 24 months, starting on April 1, 2024, and ending on March 31, 2026.

Zenith Bank has finalised the preliminary steps for a N188.4 billion rights issue, while FCMB Group plans to engage with investors regarding its N113.98 billion public offer.

Both offers are anticipated to be available for public subscription in the coming days, increasing the number of banks in the capital market to five and aiming for the initial target of N1.26 trillion.

Access Holdings is set to raise N351 billion from current shareholders, while Guaranty Trust Holding Company (GTCO) aims to secure N400.5 billion from the public.

Today, Zenith Bank and its advisers will finalise the offer documents for a rights issue of 5.23 billion shares at N36 per share, pre-allotted to existing shareholders at a ratio of one new share for every six held as of July 24.

According to TheNation, FCMB Group has initiated a public offer of 15.197 billion ordinary shares at N7.50 per share.

Over the weekend, Fidelity Bank Plc shareholders approved increasing the bank’s capital raising target from N127.1 billion to N205.45 billion.

The bank's shareholders authorised the issuance of an additional 8.2 billion shares to accommodate the potential oversubscription of its ongoing rights and public offers.

Fidelity Bank initially launched a N127.1 billion hybrid offer, consisting of a rights issue of 3.2 billion shares at N9.25 per share and a public offer of 10 billion shares at N9.75 per share.

With strong expectations of oversubscription, Fidelity Bank increased the rights issue and public offer by 3.2 billion and 5.0 billion shares, respectively.

Access Holdings is offering about 17.773 billion shares at N19.75 per share to existing shareholders, with the rights pre-allotted at one new share for every two shares held as of June 7.

This offer will close on August 14. GTCO is offering 9.0 billion shares at N44.50 per share, with the offer closing on August 12.

There are indications that Fidelity Bank’s offers, initially scheduled to close today, may be extended to capitalise on positive investor sentiment.

In the current recapitalisation effort, the CBN defines minimum capital as the sum of share capital and share premium rather than the total shareholders’ funds used in the 2004 recapitalisation.

This new definition means that nearly all banks must raise funds to maintain their banking licenses.

However, this initial wave of offers is likely to be the largest in terms of value.

In a previous report, Legit.ng disclosed the CBN's plans to work with the Economic and Financial Crimes Commission (EFCC) and other law enforcement bodies to prevent the infiltration of illicit funds into the banking sector.

Experts generally believe that banks will successfully raise the necessary capital due to their strong profitability and liquidity in the Nigerian market.

Five banks that would meet minimum capital base

In related news, Legit.ng reported that analysts and finance experts have supported the CBN's move to review the capital base of banks operating in Nigeria.

In his remarks, Prof Uche Uwaleke supported the recapitalisation of banks, calling it a positive step.

He claimed it would also potentially strengthen the nation's financial system and help the stock market.

Dr. Aliyu Ilias, a different financial analyst, stated that the banks had long anticipated recapitalisation given their recent trillion-naira gains.

Source: Legit.ng