Recapitalisation: Five banks to raise N1.26 trillion on the capital market

It is expected that major banks will raise N1.26 trillion from the stock market.

In an attempt to fulfil the requirements for recapitalisation established by the Central Bank of Nigeria (CBN).

The pre-offer procedure for a N188.4 billion rights offering will be finished by Zenith Bank today.
The investing public and FCMB Group will discuss the latter's N113.98 billion public offer tomorrow.

In the coming days, the two offers should become available for public subscription.
As a result, there will be five banks operating in the capital market, with N1.26 trillion as the starting goal.

Over the weekend, Fidelity Bank Plc's shareholders increased the bank's capital raising goal from N127.1 billion to N205.45 billion.

Holdings Access is increasing N351 billion from existing shareholders while Guaranty Trust Holding Company (GTCO) is seeking N400.5 billion from the public.
Zenith Bank will approve the offer documents for a rights issue of 5.23 billion shares at N36 per share today along with its professional advisers. One new ordinary share for every six existing ordinary shares held as of the close of business on July 24 is how the shares are pre-allotted to current shareholders.
15.197 billion common shares, valued at 50 kobo apiece, were made available to the public by FCMB Group for N7.50 a share.

Over the weekend, Fidelity Bank's shareholders gave the bank permission to issue an extra 8.2 billion common shares in order to cover any possible oversubscription to its ongoing combined rights and public offer.

Anticipating with great anticipation that its initial offerings would be oversubscribed, Fidelity Bank persuaded investors to allow it to increase the rights issue and public offer by 3.2 billion ordinary shares and 5.0 billion shares respectively.
A rights issue of 3.2 billion ordinary shares of 50 kobo each, at a price of N9.25 per share, and a public offer of 10 billion ordinary shares of 50 kobo each, at a price of N9.75 per share, comprised Fidelity Bank's N127.1 billion hybrid offer.

There are hints that Fidelity Bank may prolong its offers, which are set to expire today, in an effort to capitalise on the favourable feeling among investors that has accompanied the bank's capital raising.

At N19.75 per share, Access Holdings is giving its current shareholders approximately 17.773 billion ordinary shares, each worth 50 kobo.

As of June 7, the rights were pre-allotted in accordance with one new share for every two common shares held. The deal is set to expire on August 14.

GTCO is providing 9.0 billion ordinary shares of 50 kobo each at N44.50 per share. The offer is expected to close on August 12.
Instead of using all of the shareholders' cash as it did in 2004, the CBN is employing a unique definition of minimum capital under the ongoing recapitalisation, which is the addition of share capital and share premium.

Due to the unique definition, almost all banks must generate money in order to maintain their banking licence.

On the other hand, there are hints that, in terms of offer values, this initial cluster would have the largest concentration of offers.

Considering their reputation as some of the most lucrative and liquid in the Nigerian market, the majority of analysts stated they expected banks to be able to raise enough capital.

Mr. Olatunde Amolegbe, Managing Director of Arthur Steven Asset Management, predicted that banks will successfully recapitalise on the strength of robust fundamentals and a sizable investor base.

The majority of them, in my opinion, will prosper not just from their solid foundations but also from the fact that they will be attracting both domestic and foreign investment.

"There shouldn't be any issues if these issues are well-packaged and well-priced, as the market has sufficiently demonstrated its absorptive capacity," Amolegbe stated.

In the later stages of the recapitalisation, he predicted that mergers and acquisitions would occur, particularly among the lower-tiered banks.

According to Mr. David Adonri, Managing Director of HighCap Securities, the banks are in a good position to obtain critically needed capital.

He claims that short-term trading structures are the backbone of the Nigerian economy, and that the banking sector supports these structures and can benefit from them year-round.
This explains the industry's high profitability and appeal to investors. The problem of generating approximately N5 trillion to re-capitalize banks is one that they can easily overcome.

According to Adonri, "the capital market has the breadth, depth, and top-notch infrastructure to make the capital raising by banks successful."

The CBN examined the minimal capital requirements for commercial, merchant, and non-interest banks as part of the ongoing recapitalisation campaign, which is scheduled to conclude on March 31, 2026.

The new minimum capital requirements for commercial banks with international affiliations, or mega banks, were raised by the apex bank to N500 billion, N200 billion for commercial banks with national authorisation, and N50 billion for commercial banks with regional licenses.

A minimum capital of N10 billion is required for non-interest banks with regional licenses, N20 billion for non-interest banks with national licenses, and N50 billion for merchant banks.