• Tuesday, July 23, 2024
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BusinessDay

FCMB, Stanbic & Wema push to raise N500bn amid new capital rules

Three tier-two banks plan to raise as much as N500 billion in local and foreign currency to meet new capital rules set by the Central Bank of Nigeria (CBN).

First City Monument Bank (FCMB) Group, Stanbic IBTC and Wema Bank are among the banks to have disclosed plans to raise additional cash to achieve the CBN’s minimum capital requirements.

On Thursday, FCMB Group revealed plans to raise N150 billion through the issuance of new securities on May 24, according to a filing by the bank with the Nigerian Exchange Limited (NGX).
Read also: Zenith Bank proposes share increase of 31.3bn in recapitalisation push

The bank currently has N125.3 billion in share capital excluding retained earnings based on its audited full-year 2023 financial results and will need N374.7 billion to meet up to the N500 billion mark as it also operates internationally.

Stanbic IBTC has a current capital base of N109.3 billion based on its audited full-year 2023 financial results. This means the bank is in the market to raise N90.7 billion to meet national requirements of N200 billion.

The holding company’s directors will seek shareholders’ approval to raise additional equity capital of up to N150 billion by way of Rights Issue on May 16, as disclosed by the bank

Also, Stanbic IBTC’s directors will seek the approval of shareholders to establish a Debt Issuance Programme of up to N400 billion.

Read also: Nigerian banking: Mixed views on bank recapitalisation policy

Wema Bank, on its part, on May 28, will seek shareholder approval to raise N200 billion through a public share offering or private share sale in Nigeria or abroad.

The bank already has a capital base of N15.1 billion and will need to meet the N200 billion minimum capital requirement.

However, Sterling Bank Limited also recently raised N21 billion through the Sterling Investment Management SPV Plc under its N30bn Debt Issuance Programme.

These banks are looking to raise new capital with the Right Issues, thereby offering its existing shareholders the chance to buy additional shares for a reduced price.

The CBN has granted them 24 months to increase their capital base, requiring them to submit an implementation plan outlining their chosen strategies and timelines by April 30, 2024.

For some small and medium-sized banks that were unable to meet up to the deadline, the path to the new capital requirement is to either be acquired by a big bank or merge with another bank.

“Some small and medium-sized banks may struggle to raise the necessary capital, and could be acquired by larger banks,” analysts at global ratings agency Fitch said in a note to clients.

“Certain domestic systemically important banks have particularly high capital ratios but are significantly below the new paid-in capital requirements, and may prefer to consider acquisitions over seeking fresh capital injections,” Fitch said.

PwC in a recent report, ‘Recapitalisation response pathways: Thinking outside the box’ listed three broad responses for banks to consider: raise funds, restructure or divest.

The report explained that under the restructure pathway “banks can downgrade or change their existing licenses and also expand footprint through non-banking license authorisation.”

Another route highlighted under the restructure pathway was mergers and acquisitions.

“Banks can either be acquired by international banks venturing into the Nigerian market, acquire other local players, merge with peers, or exit and or divest portfolio components.”

The consultancy also highlighted that banks can reduce their international portfolio by setting up “an offshore holding company while maintaining a local play across their various banking options.”

BusinessDay earlier reported that tier-one banks are in a race to raise N2 trillion in additional cash to achieve the CBN’s ten-fold increase in minimum capital requirements.

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