Recapitalisation: Three banks to raise over N500bn in rights issue

As the second set of banks enter the capital market to raise additional funds to meet the new capital base requirement by the Central Bank of Nigeria, rights issues appear to be the preferred option.

Already in the market with a N150bn rights issue is FBN Holdings with 5,982,548,799 ordinary shares of 50 kobo each at N25.00 per share based on one new ordinary share for every six ordinary shares held as of the close of business on Friday, 18 October 2024.

The issue is expected to close on December 12.

United Bank for Africa is also in the market to raise  N239.39bn via a rights issue. This offering provides 6,839,884,274 ordinary shares at 50 kobo each, priced at N35.00 per share, allowing existing shareholders to purchase additional shares on a 1-for-5 basis for shares held as of November 5, 2024.

In his letter to the shareholders informing them of the rights offer, the Group Chairman of United Bank for Africa, Tony Elumelu, noted that following the resolution of the Group’s shareholders at the Annual General Meeting held in May 2024, authorising the establishment of the N400 billion Equity Shelf Programme, UBA will embark on a Rights Issue, as the first step in its broader capital raising programme.

“UBA’s Rights Issue aims to raise N239.4 billion, through the issuance of new Ordinary Shares to our shareholders. The primary objective of this Rights Issue is to further strengthen our capacity to take advantage of growth opportunities and sustain our leadership in the banking industry,” Elumelu said.

Explaining the use of proceeds, the Group Chairman noted that, beyond regulatory compliance, the funds will expand the Group’s lending capacity, invest in digital infrastructure, support sustainable business practices, and expand the Group’s African operations.

While not yet in the market, Stanbic IBTC Holdings has sought the nod of the Nigerian Exchange Limited to list a N148.71bn rights issue of 2,944,772,083 ordinary shares of 50 Kobo each at N50.50 per share based on five new ordinary shares for every 22 ordinary shares. The qualification date is Tuesday, 29 October 2024.

The shareholders of Wema Bank at their Annual General Meeting unanimously resolved “that the Bank raises additional capital in line with the Central Bank of Nigeria’s directive by way of equity or through mergers and  acquisition to meet the minimum capital requirements for a National licensed  bank.”

However, it was only in July that it listed its Rights Issue of 8.572 billion ordinary Shares of 50 Kobo each at N4.66 on the Daily Official List of NGX. The rights offer had been completed last year.

Commenting on the trend, economy and capital market analyst, Rotimi Fakayejo asserted that the majority shareholders were the ones driving the rights issues so as to maintain their holds on the banks.

He said, “I think basically, the majority shareholders want to hold on to the percentage holding that they have and I think they don’t want new shareholders, also they want more shares to themselves. You know if everyone does not take up their shares, other shareholders can buy them up as additional rights.

“I think it is more strategic on the part of the majority shareholders to strengthen their holds on the banks rather than allow external investors to come in and push them aside. They also have the confidence that they would be able to raise sufficient funds from existing shareholders.”

The Chairman of the Ibadan Shareholders Association, Eric Akinduro, affirmed that shareholders were not the ones deciding.

He said, “It is not the decision of the shareholders. By the time they bring the resolutions to us at the AGM. They give us options, either to raise capital by public offerings, rights issue, or private placement but for the rights issue, it is the primary decision of the board and when you look at it, it is a way of allowing existing shareholders to increase their investment.”

Akinduro urged investors to take up their rights to enjoy capital returns. “The prices will go up by the time the bank has achieved the required capital base, I’m telling you, every shareholder would enjoy their investment.

“It is the board that has so much confidence in the existing shareholders and I think it is right.  If you look at some of the offers around N150bn, we can take it up, even more. We are telling our members to buy more, even than the rights given to them. So, when the benefits come, we can enjoy it.”

However, the National Coordinator of the Independent Shareholders Association of Nigeria, Moses Igbrude, dismissed the claims that bank owners didn’t want shareholders saying, “That insinuation is not true, and I will tell you why. CBN said, ‘You are the owner of the bank, go and bring N500bn to recapitalise your bank’ and they gave them conditions.

“Who did the CBN give the instructions to? It was to the owner of the banks, not to new investors. The owners of the bank were the ones given the instruction.

“Also, each bank has a strategy to raise the funds. Some of them decided to meet with the owners first to see if they could raise the N500bn. If they can raise funds amongst themselves, there is no need to bring in new investors. In the case where it is not possible, they will enter the next stage of allowing new investors to come in. It is in stages.”

For the Vice Chairman of HighCap Securities and stockbroker, David Adonri, the important thing is that the banks have done their calculations and know the strategy that they are using will deliver the best outcome for them. Whether that is rights issues, public offers, or hybrid offerings.