Investors to reap big from bank recapitalisation

Investors are set to reap big from the ongoing recapitalisation process as banks raised over N1.1 trillion through public offers and rights issues in the past year, boosting significant returns once share allocations are finalised.

Since the banking recapitalisation exercise began in April 2024, seven banks—Fidelity Bank, GTCO Holdings, Access Holdings, Sterling Bank, FCMB Group, UBA, and Stanbic IBTC Holdings—have raised tier-1 capital through public offers and rights issues on the Nigerian Exchange (NGX).

An analysis of these offers indicates that investors are well-positioned to achieve substantial capital appreciation upon the conclusion of the share allocations.

Although the complete allocation of these shares and their listing on the market could lead to share dilution which may temporarily depress share prices, there is significant leverage in capital gains observed in these stocks.

Fidelity Bank’s combined N127.1 billion offering featured a public offer priced at N9.75 per share and a rights issue priced at N9.25 per share, quite attractive entry points considering the stock’s share price right now.

As of January 27, Fidelity Bank had a share price of N20.85, essentially meaning that investors in the public offer have recorded a capital appreciation of 114 percent.

An investor who committed N100,000 to purchase Fidelity Bank shares at the public offer price would see the value of their investment grow to approximately N208,500 based on current market conditions following the capital allocation.

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GTCO Holdings’ public offer share price was about N44.50, however, as of January 27, the stock was selling at a share price of N61.90, marking a 39 percent capital gain. The group raised N209 billion from its public offer, representing a 52 percent subscription of the offer.

If an investor invested N100,000 in GTCO’s public offer, the value of the investment would be approximately N139,000 based on current market price.

Access Holdings’ rights issue saw the issuance of 17.77 billion new shares worth N351 billion. The rights issue saw the sale of one new share for every 2 held by existing shareholders.

The rights issue share price was N19.75, however, with its share price around N27.80 as of January 27, the rights issue has returned a capital gain of 41 percent for existing shareholders.

Zenith Bank looked to raise around N290 billion through a combined rights issue and public offer programme. However, the programme was oversubscribed with offers worth about N350 billion received. The bank offered its public offer shares at N36.50 and its rights issue at N36 per share.

With the bank’s share price currently at N51 per share, the public offer shares have appreciated in value by 40 percent, while the rights issue shares have jumped in value by 42 percent.

FCMB Group raised about N147.5 billion in its public offer that saw it issue 15.2 billion new shares to investors at N7.30 per share. With FCMB’s share price currently at N11.85, the public offer shares have appreciated in value by a whopping 62 percent.

For Sterling Bank, rights issue shares were issued at N4 per share, on the basis of one new share for every four shares held. With Sterling Bank shares currently trading at N6.17, the shares have recorded capital gains of about 54 percent.