Guaranty Trust Holdings, Zenith Bank and FBN Holdings, three of Nigeria’s biggest commercial banks have unveiled their plans to shore up their capital base, in compliance with the directives from the Central Bank of Nigeria (CBN).
This follows a directive from the CBN, a few weeks ago, through Haruna Mustafa, Director, Financial Policy and Regulation Department, instructing commercial, merchant and non-interest banks in the country to shore up their capital base, specifically focusing on their paid-up capital and share premium which must be increased within the timeframe of twenty-four months.
Commercial banks of the status of GT Holdings, Zenith Bank and FBN Holdings are required to have N500 billion as their new capital base in the next twenty-four months.
According to the estimates of the Nigerian Observer, GT Holdings has a shortfall of N361.81 to meet the new capital base of N500 billion. Zenith Bank has a shortfall of N229.75 billion, while FBN Holdings has a shortfall of about N250 billion to meet the new capital base.
Addressing the authorities at the Nigerian Exchange Group (NGX) on the forthcoming Annual General Meeting (AGM) scheduled for May 9 2024 in Lagos, GT Holdings announced it will formalize the modalities to raise $750 million during its AGM.
GT Holdings said it will consider and approve a special resolution of the company, “That the Company be and is hereby authorised to raise additional capital of up to US$750,000,000.00 (seven hundred and fifty Million United States Dollars only), (or its equivalent in Nigerian Naira), 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,” the bank said in a note to the exchange.
It added that the form of the capital raising exercise could either be as a standalone issue(s) or by the establishment of capital raising programme(s), whether by way of public offerings, private placements, rights issues and/or other transaction modes, at price(s), coupon or interest rates determined through book building or any other acceptable valuation method or combination of methods, in such tranches, series or proportions, within such maturity periods and at such dates and upon such terms and conditions as may be determined by the board of directors of the company subject to obtaining the requisite approvals of the relevant regulatory authorities.
GT Holdings’ Memorandum and Article of Association will have to be amended accordingly to accommodate the new capital injection in the bank.
To achieve the above, the bank will have to raise its issued share capital from ₦14,715,589,612.00 to ₦22,215,589,612.00.
At the next AGM meeting slated for May 8, 2024 in Lagos, Zenith Bank will consider and approve the resolution to raise the bank’s issued share capital from N15,698,246,893.50 to N31,396,493,787.
One of the orders the bank’s board will seek from shareholders is “That the Board of Directors of the Company be and is hereby authorized to 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.”
Similarly, Zenith Bank will also amend its Memorandum and Article of Association to accommodate the new injection into the bank.
FBN Holdings will seek approval from its shareholders to raise N300 billion. The new capital raising exercise is not unconnected with the new mandate from the CBN.
“That the company be and is hereby authorised to undertake a capital raise of up u. N300,000,000,000.00 (Three hundred billion naira). The capital raise transaction shall be by Issuance of shares via a public offering, private placement, rights issue in the Nigerian or international capital market at price {&) to be determined by way of a book building process or any other valuation method or combination of methods,” FBN said in a not to the exchange.
The bank has a shortfall of about N250 billion to meet the new capital requirements.
Meanwhile, Fitch Ratings has predicted that the new CBN mandate will facilitate mergers and acquisition in the nation’s banking industry, as small and medium sized banks could find it difficult to mobilise the new capital requirements.
“Some small and medium-sized banks may struggle to raise the necessary capital, leading to increased M&A. This would result in a more concentrated banking sector, with higher barriers to entry, greater economies of scale and stronger long-term profitability,” Fitch said.
