Nigerian banks are seeking to raise nearly N2 trillion in a new round of capital raising as the banking sector’s recapitalisation heads into its final year.
The fresh capital raising is expected to cluster in the second quarter with offers from new issuers and previous issuers seeking to close their recapitalisation gaps.
Investment banking and regulatory sources yesterday said there were not less than seven banks that have advanced in their capital raising processes.
The banks include Wema Bank Plc, Fidelity Bank Plc, Guaranty Trust Holding Company (GTCO), FCMB Group, Abbey Mortgage Bank Plc, FBN Holdco and Greenwich Merchant Bank among others.
The banks are expected to explore both public issuance and private placements, with more banks seeking strategic private investors to augment their capital base.
Only three banks have so far met the new minimum capital requirements for their banking licences, under the new distinctive definition of qualified capital by the Central Bank of Nigeria (CBN).
The banking sector dominated the capital raising chart in 2024, conclusively raising about N1.23 trillion at the start of the two-year recapitalisation exercise in 2024.
Banks are expected to ride on the back of sustained investors’ appetite to meet their targets. Banking sector stocks are the highest-yielding at the stock exchange, with average return almost a double of the market’s return.
Average year-to-date return for the Nigerian equities stands at 5.41 per cent, less than half of banking sector’s 10.90 per cent.
Wema Bank, which had raised about N40 billion through share issuance to existing shareholders, is returning to the capital market to raise new equity capital through a combination of share issuance to existing shareholders and new private investors.
Fidelity Bank, which had recorded massive oversubscriptions to its initial rights and public offers in 2024, earlier this month received shareholders’ approval to issue 20 billion ordinary shares under a fresh recapitalisation drive that could see the bank raising some N300 billion.
Fidelity Bank is believed to be considering strategic private investors in its bid to retain its N500 billion international banking licence.
FCMB Group, which had raised N147.5 billion in 2024 to successfully scale its minimum capital base above the national banking licence threshold at N240 billion, is concluding arrangements for next phases of its recapitalisation.
FCMB still needs N260 billion additional equity funds to meet the N500 billion requirement for its international banking license.
Also, Guaranty Trust Holding Company (GTCO) Plc, which raised N209 billion out of its initial target of N400.5 billion, has also indicated plan to return to the market for the additional funds to retain its international banking license.
Shareholders of Abbey Mortgage Bank have approved new capital raising for the mortgage bank seeking to convert into a regional commercial bank.
The CBN had in March 2024 released its circular on review of minimum capital requirement for commercial, merchant and non-interest banks. The apex bank increased the new minimum capital for commercial banks with international affiliations, otherwise known as mega banks, to N500 billion; commercial banks with national authorisation, N200 billion and commercial banks with regional license, N50 billion.
Others included merchant banks, N50 billion; non-interest banks with national license, N20 billion and non-interest banks with regional license will now have N10 billion minimum capital. The 24-month timeline for compliance ends on March 31, 2026.
Under the new minimum capital base, CBN uses a distinctive definition of the new minimum capital base for each category of banks as the addition of share capital and share premium, as against the previous use of shareholders’ funds. While several banks have shareholders’ funds in excess of the new minimum capital base, their share premium and share capital significantly fall short of the new minimum definition.
Fitch Ratings recently reported that banks were making significant progress in raising capital to meet new capital requirements.
The global rating agency noted the initial success of the banks’ offers in 2024, which momentum it said has reduced the likelihood of significant banking sector consolidation.
Fitch stated that strong investor appetite has ensured that the vast majority of capital raisings so far have been successful, and most first- and second-tier banks should be able to meet their new capital requirements through capital raisings alone.
Fitch analysts believe the likelihood of banking sector consolidation among first- and second-tier banks has decreased.
According to Fitch, the capital raisings are contributing to a recovery in capitalisation from the impact of naira devaluation, which put pressure on capital ratios and increased dollar credit concentration risks.
Strengthened buffers over minimum capital adequacy ratio requirements will mitigate risks from a challenging operating environment, including regulatory intervention and further naira volatility, while providing room for business growth.
