Fidelity, Access, GTCO Kick-starts N4.7tn Banking Sector Recapitalisation With N878.61bn Offers

Kayode Tokede

Following the Central Bank of Nigeria (CBN) directive that banks shore up their capital, three banks, Fidelity Bank Plc, Access Holdings Plc and Guaranty Trust Holding Company Plc (GTCO) are seeking existing and new shareholders’ support to raise N878.61 billion fresh capital from the Nigerian Exchange Limited (NGX).

While GTCO is raising their capital through public offer, Access Holdings opted for rights issue while the management of Fidelity Bank giving old and existing shareholders an opportunity to own its share on NGX.

GTCO this week commenced move to raise about N400.5 billion new capital by offering 9 billion ordinary shares of 50 kobo at an offer price of N44.50 per ordinary shares.

The GTCO plans to spend N22.49 billion or 5.7 per cent of the net proceeds from the capital raising proceeds for the growth and expansion of the group (acquisition in PFA/Asset Management Businesses).

The Managing Director and Chief Executive Officer, GTCO, Segun Agbaje revealed to capital market community that the group would spend N138.5 billion on branch network expansion and refurbishment, N98.5billion on technology infrastructure upgrade, N133 billion on lending to corporates, commercial, retail and SMEs segment.

As of July 16, the stock price of GTCO was at N45.60 per share on the floor of the Exchange.

On its part, Fidelity Bank is offering a rights issue of 3.2 billion ordinary shares of 50 kobo each at N9.25 per share. The bank is also simultaneously offering 10 billion ordinary shares of 50 kobo each to the general investing public at N9.75 per share.

Market forces had pushed Fidelity Bank’s stock price above N10 per share before the commencement of the exercise and market analysts have expressed that the lenders two offers would be oversubscribed.

Fidelity Bank currently trading at N10.50 per share as of July 16, 2024.

The acceptance and application lists for the rights issue and public offers, which opened on Thursday, June 20, 2024, are scheduled to close on Monday, July 29, 2024. The rights issue has been pre-allotted on the basis of one new ordinary share for every 10 existing ordinary shares held as at the close of business on Friday, January 05, 2024.

For Access Holding, the management is seeking existing shareholders support for 17,772,612,811 ordinary shares of N0.50 each at a price of N19.75 per share through rights Issue offers

The offer will be issued on the basis of one (1) new ordinary share for every two (2) existing ordinary shares held as of Friday, June 7, 2024.

This marks a significant milestone in the group’s previously announced Capital Raising Programme, which aims to generate up to $1.5 billion.

As of July 16, 2024, the stock price of Access Holdings closed for trading at N19.25 per share, about N0.50 per share below the offer price.

Capital market analysts said that competition for investors’ interest would be keen as commercial banks would require about N4.7 trillion to meet the recapitalisation benchmark set by the central bank.

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

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 commercial banks were required to meet the minimum capital requirement within 24 months commencing from April 1, 2024, terminating on March 31, 2026.

Speaking with THISDAY, Investment Banker and Stockbroker, Mr. Tajudeen Olayinka stated that the capital raising exercise is a welcome development, stressing that the stock market is ready to support banks in their quest to meet CBN requirements.

“The truth is that most banks may not be able to raise as much as they require from the stock market at this time because of high interest rate, among other factors. Ordinarily, banks could have raised as much as they required at a lower cost of equity and as it is now, they may have to consider a higher cost of equity.

“For that reason, some will have to go by the way of right issues and public offer like what Fidelity Bank is doing right now. The exercise will attract foreign investors and local investors are ever ready but may not show much interest due to weaker purchasing power,” Olayinka explained.

Speaking from shareholders perspective, the National coordinator, Progressive Shareholders Association of Nigeria (PSAN), Mr. Boniface Okezie welcomed commercial banks decision to access the Nigerian capital market to raise capital amid CBN directives.

He said, “A bank like Fidelity Bank had make a move to raise fresh capital before the announcement of CBN as the management aimed at opening new branches, improving on Information Communication Technology and enhancing customer services.

“The banking sector recapitalisation during Prof. Charles Soludo regime as CBN governor reformed the sector. It could have been difficult for our banks to expand beyond Africa, Europe and Asia without that effort. The recapitalisation serves as a buffer and aid banks to support the real sector of the economy.”

He urged shareholders to take their rights by investing in the banking stocks.

On her part, the Chairperson of the Pragmatic Shareholders Association, Mrs. Bisi Bakare said shareholders over the years have been waiting for banking sector recapitalisation.

“Banks accessing the stock market to raise fresh capital is a welcome development. However, we (shareholders) just hope the price of the offers is going to be friendly to existing shareholders. Of course, we are very happy Nigerian banks are accessing the capital market to raise funds for them to meet the new recapitalisation requirement of CBN,” she said.

Speaking from a different perspective, the former National Co-ordinator, Independent Shareholders Association of Nigeria (ISAN), Dr Anthony Omojola commended the moves by banks to raise capital from the stock market, emphasising on the timing and prices.

“Banks accessing the capital market to raise capital is based on the directive of CBN but the timing is my major concern. The CBN gave banks 24 months and I think there is no need to rush since they have till 2026. Some banks will be thinking the earlier we access the market, the better for a successful capital raising exercise.

“Standard of living and purchasing power are severe and we are thinking the federal government will slow down inflation rate and improve the foreign exchange for shareholders to partake in these offers by Nigeria banks. The small banks are rushing to access the capital with the thinking that the big banks will affect shareholders buying into their capital raising exercise,” he explained.