Four banks open bid to raise N1tr from capital market

Cardoso on banks

Four commercial banks with international license – Fidelity Bank Plc, Access Holdings Plc, Guaranty Trust Holding Company (GTCO) Plc and FCMB Group Plc – which altogether needed to increase their capital base to N2 trillion, are seeking to raise about N1 trillion in the first phase of intense competition for investors’ funds.

Cardoso on banks2

The first cluster of offers came as the Central Bank of Nigeria, (CBN), at the weekend said the ongoing recapitalisation will produce resilient and fit-for-purpose banks with more ability to grow the economy.

CBN governor, Olayemi Cardoso, said banks recapitalisation will further strengthen the financial system and make it robust to be able to withstand economic headwinds.

Regulatory reports yesterday indicated that three other banks- Access Holdings, GTCO and FCMB have gotten approval to join Fidelity Bank in the capital market, with the four offers’ periods expected to overlap.

The four banks, which have combined share capital and share premium of N644.995 billion, need to raise N1.355 trillion to meet the new minimum capital requirement of share capital and share premium of N500 billion each, for a bank with international license.

Access Holdings yesterday opened acceptance list for a N351 billion rights issue. It is offering about 17.773 billion ordinary shares of 50 kobo each to existing shareholders at N19.75 per share. The rights are pre-allotted on the basis of one new share for every two ordinary shares held as at June 7. The offer is scheduled to close on Wednesday, August 14.

Fidelity Bank had launched a N127.1 billion hybrid offer including a rights issue of 3.2 billion ordinary shares of 50 kobo each at N9.25 per share and a public offer of 10 billion ordinary shares of 50 kobo each at N9.75 per share. The acceptance and application lists for Fidelity Bank’s combined offer, which opened on June 20,  are scheduled to close on July 29. The rights issue was pre-allotted on the basis of one new ordinary share for every 10 existing ordinary shares held as at the close of business on January 05.

In the largest of the fund-raising so far, GTCO is launching a N400.5 billion public offer by 9.0 billion ordinary shares of 50 kobo each at N44.50 per share. GTCO, which had secured approval of the Nigerian Exchange (NGX), will meet with capital market stakeholders today to outline facts behind its offer, preparatory to the opening of formal application list.

FCMB Group has also secured approval for a N113.98 billion public offer. The group is offering 15.197 billion ordinary shares of 50 kobo each at N7.50 per share.

The current capital raisings by Access Holdings and GTCO are more than enough to meet their new capital requirements.

However, Fidelity Bank and FCMB Group are implementing multi-layered recapitalisation plans that may see the banks coming to the market as many times as needed to meet their capital requirements. There is indication that Fidelity Bank may raise more than N127.1 billion under the ongoing combined offer, given the generally positive investors’ sentiment around the bank. The board of Fidelity Bank has already launched a regulatory process that will allow the bank to absorb excess funds in the event of potential over-subscription.

Under the current recapitalisation process, the CBN is using a distinctive definition of minimum capital as addition of share capital and share premium, rather than the entirety of shareholders’ funds used under the 2004 recapitalisation plan. With the distinctive definition, nearly all banks need to raise funds to retain their banking license.

Access Holdings has share capital and share premium of N251.81 billion; FCMB, N125.29 billion; Fidelity Bank, N129.705 billion and GTCO, with N138.187 billion.

Speaking at the weekend during the launch of a new book: “The Power of One Man- How the Soludo-Engineered Consolidation Transformed Nigerian Banks to Global Players”, Cardoso said it was important that banks are recapitalised to the levels, where they will be able to absorb any shocks that come and also be able to grow the economy. The book was written by renowned journalist, Dr. Ray Echebiri.

Cardoso, who was represented by Deputy Governor, Financial System Stability, Phillip Ikeazor, said the apex bank had kept close touch with former CBN governor and Anambra State governor , Prof. Chukwuma Soludo in the course of recapitalisation.

He said the decision taken by Soludo 20 years ago on banking consolidation was a very bold one at that time with banks’ capital base of N2 billion raised to N25 billion. “That is about 12 and half times. Incidentally, the current management of CBN has embarked on another round of banking consolidation”, he stated.

Recall that the CBN had on July 6th 2004, announced the recapitalization of banking sector from N2 billion to N25 billion with effect from 31st December, 2005. The initiation of increasing the banks minimum capital base to N25 billion in 2006 led to a remarkable reduction in number of banks from 89 to 25.

Providing more reasons why bank recapitalisation was crucial, the Cardoso said:  “Remember that when the current administration came into place, there were unification of forex rates, and removal of petrol subsidy. And the impact on the economy and manufacturing sector has started manifesting in 2024 and will continue over the next few years. So, it is important that the banks are recapitalised to the levels, whereby they will be able to absorb any shocks that come and also position the banks to be able to grow the economy”.

Soludo described the 2004 banking consolidation as a revolution that produced today’s mega banks, saying Nigerian banks have today expanded to different African countries, Europe, America and Asia, among others.

Charles Soludo governor of Anambra 696x348

Soludo, who was the Special Guest of Honour at the event, said the consolidation was nothing short of a revolution, with many people describing as an impossible mission. He said the CBN team, especially the Deputy Governors and himself, went through hell to achieve the results that turned around the financial sector.

He said the organised labour, Manufacturers Association of Nigeria (MAN) and even the labour unions in banks kicked against the reform. “I remember, those days we spent weeks here in Lagos trying to midwife mergers of strange bird fellows. I remember the hours we spent just reconciling directors of various banks and their irreconcilable differences.  Nigeria is a country of infinite possibilities. It was a disruptive change and the revolution that have changed Nigerian banking and financial system forever”, Soludo said.

According to him, the apex bank, then wanted a private sector-led economy, and decided to pull down the entire banking system for a fresh rebuild.

​Lagos State governor, Babjide Sanwo-Olu, advised the current leadership of the CBN to seek wise counsel to ensure that the ongoing banking recapitalisation succeeds.

The author, Echebiri, said the 20th anniversary of the banking consolidation marks a watershed in the Nigerian financial sector.

Other dignitaries at the event were Chief Guest of Honour, Chief Olusegun Obasanjo, former president of Nigeria, who was represented by former Governor, Donald Duke; Ogun State Governor, Dapo Abiodun and Senior Vice Chairman/Editor-In-Chief at LEADERSHIP Media Group, Azu Ishiekwene, who reviewed the book.

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