• Monday, May 27, 2024
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BusinessDay

FCMB N150bn capital raise signals merger or operating license change

FCMB Group shareholders approve N150bn capital raise to drive future growth plans

Nigerian lender First City Monument Bank (FCMB) is planning to raise an additional N150 billion through the issuance of new securities.

FCMB currently has N125.29 billion and based on its unaudited full year 2023 financial results and will need over N370billion to meet up to the N500 billion mark as they also operate internationally.

“FCMB’s plan to raise an additional N150billion through issuance of securities comprising ordinary shares, preference shares, would suggest that it is opting to downgrade its license from international to national.

“Based on current capital, FCMB would need at least N375billion to maintain its international license,” a financial analyst and keen observer of the bank recapitalisation process told BusinessDay.

However, it requires only N75 billion to meet the N200 billion required for a national license. The financial analyst told BusinessDay that FCMB may possibly later on merge with another, “to meet the N500billion capital to be or maintain an international license.”

The move to raise fresh capital comes as the Central Bank of Nigeria (CBN) announced last March a ten-fold jump in minimum capital requirements for banks, nearly two decades since the last exercise.

The minimum capital requirement was raised to N500 billion for those with international authorisation, N200 billion for commercial banks with national authorisation, and N50 billion for those with regional authorisation.

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.”

The tier-two bank is set to hold its annual general meeting on May 24, 2024.