Zenith, Access, 3 Other Banks in Race to Raise N1.26tn Ahead of CBN's Recapitalisation Deadline

• Major Nigerian banks have started making moves to align with the recapitalisation push by the Central Bank of Nigeria
• Some of the banks have taken to the capital market to pursue fundraising drives through rights issues and public offer
• The CBN had a few months ago announced various capital bases different tiers of banks need to meet to maintain their banking licenses

Legit.ng journalist Victor Enengedi has over a decade's experience covering Energy, MSMEs, Technology and the stock market.

Leading banks are set to generate N1.26 trillion in the capital market to comply with the recapitalisation requirements established by the Central Bank of Nigeria (CBN).

It would be recalled that in March 2024, the minimum capital base required by banks operating in Nigeria was reviewed upwards by the CBN.

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The CBN had mandated that banks meet the minimum capital requirement within 24 months, starting on April 1, 2024, and ending on March 31, 2026.

Banks engage rights issues, public offers

Zenith Bank has finalised the preliminary steps for a N188.4 billion rights issue, while FCMB Group plans to engage with investors regarding its N113.98 billion public offer.

Both offers are anticipated to be available for public subscription in the coming days.

Access Holdings is set to raise N351 billion from current shareholders, while Guaranty Trust Holding Company (GTCO) aims to secure N400.5 billion from the public.

Zenith Bank and its advisers will finalise the offer documents for a rights issue of 5.23 billion shares at N36 per share, pre-allotted to existing shareholders at a ratio of one new share for every six held as of July 24.

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According to TheNation, FCMB Group has initiated a public offer of 15.197 billion ordinary shares at N7.50 per share.

Over the weekend, Fidelity Bank Plc shareholders approved increasing the bank’s capital raising target from N127.1 billion to N205.45 billion.

The bank's shareholders authorised the issuance of an additional 8.2 billion shares to accommodate the potential oversubscription of its ongoing rights and public offers.

Fidelity Bank initially launched a N127.1 billion hybrid offer, consisting of a rights issue of 3.2 billion shares at N9.25 per share and a public offer of 10 billion shares at N9.75 per share.

With strong expectations of oversubscription, Fidelity Bank increased the rights issue and public offer by 3.2 billion and 5.0 billion shares, respectively.

Access Holdings is offering about 17.773 billion shares at N19.75 per share to existing shareholders, with the rights pre-allotted at one new share for every two shares held as of June 7.

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This offer will close on August 14. GTCO is offering 9.0 billion shares at N44.50 per share, with the offer closing on August 12.

There are indications that Fidelity Bank’s offers, initially scheduled to close on July 31, may be extended to capitalise on positive investor sentiment.

Banks' race to fundraise

In the current recapitalisation effort, the CBN defines minimum capital as the sum of share capital and share premium rather than the total shareholders’ funds used in the 2004 recapitalisation.

This new definition means that nearly all banks must raise funds to maintain their banking licenses.

However, this initial wave of offers is likely to be the largest in terms of value.

In a previous report, Legit.ng disclosed the CBN's plans to work with the Economic and Financial Crimes Commission (EFCC) and other law enforcement bodies to prevent the infiltration of illicit funds into the banking sector.

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Speaking to Legit.ng on the matter, Dr Ifeanyi Ubah, an economist said the CBN's new recapitalisation base for banks is crucial for the stability and growth of the financial sector.

He said:

"By requiring banks to increase their capital, the CBN aims to enhance their resilience against economic shocks and ensure they can support larger economic activities. This move is expected to improve confidence in the banking sector, attract foreign investment, and promote sustainable economic development. Banks must meet this new requirement to maintain competitiveness, safeguard depositors' funds, and contribute effectively to the nation's financial stability and growth. "

He added that compliance will foster a stronger, more robust banking system capable of driving economic progress.

Five banks that would meet minimum capital base

In related news, Legit.ng reported that analysts and finance experts have supported the CBN's move to review the capital base of banks operating in Nigeria.

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In his remarks, Prof Uche Uwaleke supported the recapitalisation of banks, calling it a positive step.

He claimed it would also potentially strengthen the nation's financial system and help the stock market.

He pointed out that certain banks had started the re-capitalisation process earlier than expected, particularly after the CBN governor's declaration in November of last year.

Source: Legit.ng