Not less than five banks are rounding off preliminary documentation and approval processes to raise more than N1 trillion in the second cluster of the capital raising under the ongoing banking recapitalisation.
Multiple sources yesterday confirmed that the banks have reached advanced stages in their pre-offer processes, with the two largest banks within the cluster expected to headline the capital raising this quarter.
The banks include United Bank for Africa (UBA) Plc, Stanbic IBTC Holdings Plc, Wema Bank Plc, Premium Trust Bank and Jaiz Bank Plc among others.
In the first cluster, five banks were believed to have raised more than N1.5 trillion in a momentous opening to the Central Bank of Nigeria (CBN) directed programme. Those that have raised funds from the capital market are Guaranty Trust Holding Company (GTCO) Plc, Access Holdings Plc, Zenith Bank International Plc, Fidelity Bank Plc and FCMB Group Plc. Sterling Holding Company is rounding off its offer.
Investment banking sources said UBA and Stanbic IBTC Holdings would lead the next cluster with the two first-tier banks expected to launch their offers within this quarter.
Nigeria’s apex capital market regulator, Securities and Exchange Commission (SEC), is already considering applications from the banks.
A source close to SEC confirmed that there were some six offers currently undergoing regulatory approval process, the main regulatory hurdle preparatory to the launching of the offers.
UBA, which has shareholders’ approval for multi-instrument capital raising programme, is expected to start with a rights issue under which the bank plans to raise more than N384 billion.
Stanbic IBTC Holdings, which had launched a N550 billion capital raising process, has also reached advanced stage for the first tranche of its multi-instrument capital raising, according to market sources.
Stanbic IBTC Holdings is also headlining its equity raising with a rights issue, a favourite instrument under the ongoing recapitalisation programme. Stanbic IBTC Holdings’ N550 billion capital raising include a rights issue of N150 billion and a N400 billion debt capital raising.
Shareholders of the company had authorized the board “to raise additional equity capital of up to N150 billion by way of a rights issue or offer for subscription on such terms, tranches, conditions and dates as may be determined by the directors”.
Wema Bank, with a national banking licence, is concluding pre-issuance processes to raise N200 billion in new equity funds, in a bid to preserve the 79 years old bank as a standalone entity post recapitalisation. Wema Bank, with a share capital and share premium of N15.13 billion, has one of the smallest starting points among the banks.
Jaiz Bank has also secured preliminary approvals to float a rights issue of about 5.41 billion ordinary shares of 50 kobo each at offer price of N1 per share. This may take the bank’s minimum capital base, under the new definition, to more than N34 billion.
Premium Trust Bank aims to raise about N180 billion in an ambitious plan to retain one of Nigeria’s youngest banks as a standalone entity. The bank commenced operations in April 2022.
Experts had estimated that banks could raise about N5 trillion within the two-year recapitalisation period.
The CBN in March released its circular on review of minimum capital requirement for commercial, merchant and non-interest banks. The apex bank increased the 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 include 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.
Providing insights into the bank’s recapitalisation plan, Chairman, United Bank for Africa (UBA) Plc, Mr. Tony Elumelu, said the bank was confident of meeting the required minimum capital for its international license.
He outlined three options UBA is considering to shareholders including rights issue which gives existing shareholders the first chance to buy new shares at a discounted price, private placement directly to a small group of investors and public offer to the general investing public.
He urged shareholders to participate in the rights issue, highlighting the benefits of maintaining their ownership stake in the bank. He also plans to reinvest all his own dividends back into UBA.
“We democratise prosperity. We like everyone to share it. So I’m requesting, advising shareholders, as you get your dividend, if you can, reinvest significant part of it. My group and I, we will reinvest 100 per cent in the dividend we get. Because if we do not do so, we are leaving food on the table for others who did not labour for it.
“You know, we could have been sharing dividends over the years, that by today, our shareholders would have made N1 trillion. We would have shared N1 trillion to all of you. That additional money we have to bring to the table would have been brought from your earnings, from your dividends. But because we have been prudent and conservative, we felt no need to do so. Let’s keep banking. We need all the capital we can get. Let’s keep investing. And so we conserve.
“We want to raise the rights in series. Next year, we’re going to finish all that. So we’re doing this to give shareholders the opportunity to raise money from at least your own investments to be able to reinvest. You know, three stages-rights, private placement, and public offer. I doubt that you get the public offer. I doubt it. Because we’ll be selling the shares at giveaways.
“The reason we have it in one of the resolutions is that today, UBA is no longer a Nigerian bank, We’re a pan-African bank, we operate in different jurisdictions. So, we want to use this opportunity to create access for people from across Africa in particular. Especially in the present context we are operating to invest in UBA.
“So, every country will have the opportunity. We allocate like $10 million to $20 million. Ghana, raise people who want to invest up to that, Tanzania, Kenya, etc. So, if what we don’t take by rights is, well will almost be taken out by our customers and friends. UBA remains a conservative bank,” Elumelu said.
