Recapitalisation: First Bank, Access, Zenith, GTbank, UBA Plot Strategic Expansion

As the Nigerian banking landscape navigates the turbulent waters of regulatory requirements, some frontline banks have mapped out various strategies to meet the new threshold. In this report, Festus Akanbi and Kayode Tokede run through the cocktail of capital-raising plans of these institutions, noting that other banking giants are on the verge of unveiling their strategies too

Weeks after the whistle for the commencement of banks’ recapitalisation was blown by the Governor of the Central Bank of Nigeria (CBN), Mr. Olayemi Cardoso, the attention of stakeholders in these institutions has for obvious reasons returned to the boardrooms.

In the new dispensation, commercial banks are facing minimum capital thresholds of N500 billion for international authorisation and N200 billion for national authorisation.

In contrast, those with regional authorisation are expected to achieve a N50 billion capital floor.

Similarly, non-interest banks with national and regional authorisations will need to increase their capital to N20 billion and N10 billion, respectively. 

The directive, which was contained in a CBN circular, emphasised that all banks were required to meet the minimum capital requirement within 24 months commencing from April 1, 2024, terminating on March 31, 2026.

To enable the banks to meet the minimum capital requirements, the CBN urged banks to consider injecting fresh equity capital through private placements, rights issues, and/or offers for subscription; Mergers and Acquisitions (M&As); and/or upgrades or downgrade of license authorisation.

Meanwhile, the CBN said all banks were required to submit an implementation plan (clearly indicating the chosen option(s) for meeting the new capital requirement and various activities involved with their timelines) no later than April 30, 2024.

Feelers from banks in the last two weeks confirmed that they are facing a daunting task.  The CBN’s directive is akin to a seismic shockwave, rippling through the corridors of Nigeria’s banking sector. Directors, management teams, and staff find themselves in a whirlwind of activity, scrambling to prepare for the new threshold. 

So far, banks like First Bank,  Access Bank,  Zenith Bank  GTbank and United Bank for Africa Plc have announced concrete plans to raise capital through their holding companies, as a move to meet the new regulatory requirement.

While these five banks are very clear about their missions, sources said others, including Fidelity Bank, are also in the picture. However, most of the banks in this group are said to be waiting for regulatory approval before they make their plans public.

First Bank

For FBN Holdings, the management is planning to seek shareholders’ approval this month to shore up its capital by N300 billion ($241 million) through a public share offering or private share sale in Nigeria or abroad.

The holding company on the Nigerian Exchange Limited (NGX) said it will ask shareholders for permission to raise the funds at a meeting set for April 30.

The group in its unaudited full year ended December 31, 2023, declared N1.7 trillion total equity as against N995.7 billion in 2022.

FBH Holdings’s share capital and share premium stood at N17.95 billion and N233.39 billion in 2023 respectively, while retained earnings increased to N675.12 billion in 2023 from N397.71 billion reported in 2022.

Access Bank

Access Holdings Plc, on its part, has unveiled plans to establish a Capital Raising Programme of up to $1,500,000,000 or its equivalent.  This will come in the form of the issuance of various financial instruments such as ordinary shares, preference shares, Alternative Tier 1 capital, convertible and/or non-convertible debt, bonds, or other capital and/or funding instruments.

According to a statement by the holding company, it expects to raise N365,000,000,000 specifically via a Rights Issue of ordinary shares. The proceeds of the proposed Rights Issue would be used to support ongoing working capital needs including organic growth funding for its banking and other non-banking subsidiaries.

The statement explained that “the programme may be executed through a variety of methods including public offerings, private placements, rights issues, book-building processes, or a combination thereof.”

Access Holdings closed 2023 with N2.19 trillion total equity, a growth of 77.5 per cent from N1.23 trillion reported in 2022.

The breakdown of total equity revealed a Share capital and share premium of N251.8 billion in 2023, Retained earnings/ (Accumulated deficit) that stood at N715.1 billion in 2023, representing a 75 per cent increase from N408.7 billion reported in 2022.

UBA

On its part, UBA said it was actively exploring a well-defined strategy to boost its capital base and ensure compliance within the regulatory time frame

The Group Managing Director of UBA Plc, Oliver Alawuba, who boasted that the bank remains among the top capitalised banks, said: “This strategy may include a combination of options such as rights issue or private placement. 

Alawuba added: “I want to reiterate that UBA is very well capitalised with shareholders’ funds in excess of N2 trillion. We will in due course, raise the required component of capital in line with the CBN directive.”

The pan-Africa bank closed the 2023 financial year with N2.03trillion shareholders fund from N922.1 billion reported in 2022. 

As share capital and share premium remained flat at N17.1billion and N98.71 billion in 2023, respectively, retained earnings closed 2023 at N919.87 billion, a growth of 1114.2per cent from N429.53 billion reported in 2022.  

GTBank

Giving an insight into the plans for its recapitalisation, the Group Chief Executive Officer of Guaranty Trust Holding Company Plc (GTCO Plc), Mr. Segun Agbaje explained that the bank is targeting $750million but it will also go for domestic transactions in the form of offer for sale to raise N500billion.

This tallied with the position of the Group General Counsel/Company Secretary, GTCO, Erhi Obebeduo, who in a signed statement said, the company is authorised to raise additional capital of up to $750million, through the issuance of securities comprising ordinary shares, preference shares, convertible and/or non-convertible notes, bonds or any other instruments, in the Nigerian and/or international capital markets.

He noted that the issued share capital of the company has been increased from N14.7 billion divided into 29,431,179,224 ordinary shares of N0.50 each to N22.2 billion divided into 44,431,179,224 ordinary shares of N0.50 by the creation and addition of 15,000,000,000 ordinary shares of N0.50 each ranking pari-passu with the existing ordinary shares of the company.

The group closed the 2023 financial year with N1.48 trillion in total equity, a growth of 59per cent from N9331.15 billion reported in 2022, influenced by N580.03 billion retained earnings in 2023 from N214.86 billion in 2022. 

Zenith Bank

For Zenith Bank, its Company Secretary, in a statement recently Michael Otu announced the increase in the issued share capital of the company from N15,698,246,893.50  divided into 31,396,493,787 ordinary shares of N0.50 Kobo each to N31,396,493,787 by the creation of 31,396,493,787  ordinary shares of N0.50 Kobo each ranking pari passu with the existing ordinary shares of the company.

He said the bank will establish a capital raising programme in the Nigerian or international capital market of up to the authorised capital of the company, through the issuance of ordinary shares, or preference shares, whether by way of a public offering, private placement, rights issue or both, or any other method or combination of methods, in such tranches, series or proportions and at such dates, and conditions as may be determined by the board subject to obtaining the requisite regulatory approvals.

“That in the event of a Rights Issue, any shares not taken up by existing shareholders within the period stipulated under the Rights issue may be offered for sale to other interested shareholders of the Bank on such terms and conditions as may be determined by the Directors subject to the approvals of the relevant regulatory authorities, he stated.”