Recapitalization race: Top banks target $3bn fund in foreign capital markets

Four of the tier-1 banks in the country, FBN Holdings, Access Holdings, Guaranty Trust Holding Company Plc and United Bank for Africa Plc have indicated plans to raise about over $3.03bn (N3.46tn) in fresh capital.

This came barely one month after the Central Bank of Nigeria directed Deposit Money Banks to recapitalize.

According to The PUNCH findings on Sunday, the four tier-1 banks announced plans to raise funds from both the international capital market and the local market.

At least two of the financial institutions, FBN Holdings and GTCO announced their plans to raise fresh capital last week, while Access Holdings said it would raise capital in both naira and US dollars.

FBN Holdings in a notice of its Extraordinary General Meeting filed with the Nigerian Exchange Limited disclosed that it would be seeking shareholders’ approval to raise N300bn additional capital.

According to the notice, shareholders will consider and vote on the special business “that the company be and is hereby authorised to undertake a capital raise of up to N300,000,000,000.00 (three hundred billion naira)”

The financial institution is seeking to raise the funds via a public offering, private placement, or rights issue in the Nigerian or international capital markets.

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

In a notice on the capital raising, GTCO said 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.”

Similarly, Access Holdings is seeking to launch a capital raising programme to raise funds in two currencies, the Nigerian naira and the US dollar.

In a statutory notice filed with the NGX, Access Holdings said that it was looking at raising $1.5bn via a share sale or bond offering. The parent company of Access Bank, said it would also ask existing shareholders for permission to raise N365bn through a rights issue at its next Annual General Meeting scheduled to be held this month.

The United Bank for Africa also revealed plans to raise fresh capital to meet the new regulatory benchmark.

In a statement issued late Sunday, the banking group said it is actively exploring a well-defined strategy to boost its capital base and ensure compliance within the regulatory time frame.

UBA’s Group Managing Director/Chief Executive Officer, Oliver Alawuba, in the statement, said, “This 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.”

As of the time of this report, tier-2 bank, Wema Bank said it had raised N40bn during its rights issue and is waiting for regulatory approval.

The bank’s MD, Moruf Oseni, said that it would “Accelerate its capital management plans and ensure we embark on the journey to raise the required capital as quickly as possible.”

Sterling Bank Limited recently raised N21bn through the Sterling Investment Management SPV Plc under its N30bn Debt Issuance Programme.

On Friday, Zenith Bank said it would be asking shareholders for approval to increase its issued share capital from N15,698,246,893.50 divided into 31,396,493,787 ordinary shares of N0.50 Kobo each to N31,396,493,787 through the creation of new shares.

It has yet to state the value of the additional capital it intends to raise via the creation of fresh shares. However, it was stated, that the capital raising programme is being proposed to happen on both the Nigerian and international capital markets.

According to the issuing house, Afrinvest Capital Limited, the offer opened on March 27th, 2024, and closed on Monday, April 8, 2024. The proceeds will be used to purchase 10 Year Notes issued by Sterling Bank Limited.

The CBN had in a circular in late March to commercial, merchant and non-interest banks and promoters of new banks announced the review of the capital requirements for the operations of the affected categories of banks in the country.

Citing both domestic and global shocks, the apex bank in a statement signed by its Acting Director, Corporate Communications, Sidi Ali, said it had become necessary to raise the capital base of the banks.

Thus, the CBN directed commercial banks with international authorisation to increase their capital base to N500bn and national banks to N200bn while those with regional authorisation are expected to achieve a N50bn capital floor. Similarly, non-interest banks with national and regional authorisations will need to increase their capital to N20bn and N10bn, respectively.

According to the CBN circular, only the share capital and share premium items on the Shareholder Fund portion of the balance sheet will be recognised in this particular round of recapitalisation.

The apex bank circular said, “For Existing Banks a. The minimum capital specified above shall comprise paid-up capital and share premium only. For the avoidance of doubt, the new capital requirement shall NOT be based on the Shareholders’ Fund. b. Additional Tier 1 Capital shall not be eligible for the purpose of meeting the new requirement. c. All banks are required to meet the minimum capital requirement within a period of 24 months commencing from April 1, 2024 and terminating on March 31, 2026. d. Notwithstanding the capital increase, banks are to ensure strict compliance with the minimum capital adequacy ratio requirement applicable to their license authorization. e. In line with extant regulations, banks that breach the CAR requirement shall be required to inject fresh capital to regularize their position.”

For proposed banks, the CBN said that their minimum capital requirement shall be paid-up capital and applicable to all new applications for banking licences submitted after April 1. 2024.