By Chisaa Okoye (Business Reporter)
The Central Bank of Nigeria (CBN), on March 28, 2024, announced an increase in the capital base for commercial, merchant and non-interest banks in Nigeria.
The apex bank put the capital base of banks with international authorisation at N500 billion while that of national banks was increased to N200billion.
The banking industry apex regulator also pegged the new minimum capital for merchant banks at N50billion, while non-interest banks with national and regional authorisations are mandated to raise their capital thresholds to N20billion and N10billion, respectively.
The recapitalisation plan was initially revealed by the CBN Governor, Mr. Olayemi Cardoso, in a speech at the Annual Bankers’ Dinner in November 2023.
The development was thereafter affirmed on March 28 by the apex bank in a statement signed by Haruna Mustafa, director, financial policy and regulation department. According to CBN, the upward review will enhance banks’ resilience, solvency, and capacity to continue supporting the growth of the Nigerian economy.
The banking industry regulator explained that the increase was necessary due to prevailing macroeconomic challenges and headwinds occasioned by external and domestic shocks.
To meet the minimum capital requirements, it advised 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.
The banks were also directed to submit an implementation plan, clearly indicating the chosen option{s) for meeting the new capital requirements and various activities involved with their timelines. The CBN gave the banks not later than April 30, 2024 to submit their implementation plans to the Director, Banking Supervision Department.
The apex regulator noted that all banks are required to meet the minimum capital requirement within 24 months, commencing from 1 April and terminating on 31 March 2026.
Like in 2004 when the CBN raised the capital base from N2billion to N25billion, mergers and acquisition, were among the options opened to the banks to meet the capital requirements.
In fact, the 2004 banking reform was characterised by massive mergers and acquisition activities, ultimately reducing the number of banks in Nigeria from 89 to 25.
Expectedly, some small and medium-sized banks that are unable to meet up the latest capital requirement deadline, may either be acquired by the big banks or merge with peers.
Already, the central bank, on Wednesday, August 6, approved the merger of Providus Bank and Unity Bank, signaling the first merger to be approved following the mandate by the apex bank to increase banks’ minimum capital base.
In compliance with the CBN’s directive, most banks have since unveiled strategic plans to raise fresh capital through private placements, rights issue and/or public offering to meet the capital requirements introduced by the CBN.
Some have already hit the market to raise capital from old and new investors.
On June 20, Fidelity Bank Plc opened its application for an N127.1 billion combined rights issue for existing investors and a public offer for new investors. The bank became the first to go public following the recapitalisation directive of the CBN.
Under the Rights Issue, 3.2 billion ordinary shares of 50 kobo each are offered in the ratio of 1 new ordinary share for every 10 ordinary shares held as of January 5, 2024, at N9.25 per share.
For the Public Offer, 10 billion ordinary shares of 50 kobo each are offered to the general investing public at N9.75 per share.
The bank has extended by two weeks its ongoing combined offer (public offering and rights issue), having sought and obtained the approval of the Nigeria’s Securities and Exchange Commission (SEC) for the extension of the closing date to August 12, 2024 from June 29.
Access Holdings Plc, followed suit as the company, on July 8, announced the commencement of its N351 billion capital raising through a rights issue.
The bank is offering 17,772,612,811 new ordinary shares of N0.50 each at N19.75 per share to its existing shareholders. This will be issued on the basis of one new ordinary share for every two existing ordinary shares held as of Friday, 7 June 2024.
On its part, Guaranty Trust Holding Company (GTCO) Plc, on July 15, opened its offer for a subscription of 9,000,000,000 ordinary shares of 50 kobo each at N44.50 per ordinary share.
GTCO plans 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 company said it 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 application lists for the public offer is expected to close on Monday, August 12, 2024.
Similarly, FCMB Group, on July 30, launched its public offer seeking to raise N110.9 billion in additional capital through the issuance of 15.197 billion shares at N7.30 per share.
In addition to its public offer, which is expected to be concluded by October, the Group said it has adopted a three-phased approach to raise up to N397 billion in additional capital to drive its diversification plans, including incorporating a Technology Holding Company by 2026.
For First Bank Nigeria (FBN) Holdings, its plan is to sell shares to private investors and existing shareholders to raise N300 billion.
According to a recent release by the company, the capital raise transaction shall be by issuance of shares via a public offering, private placement and rights issue in the Nigerian or international capital markets.
Also, two other tier two banks – Stanbic IBTC and Wema Bank have unveiled plans to raise additional cash to achieve the CBN’s minimum capital requirements.
Stanbic IBTC, with a current capital base of N109.3 billion on its audited full-year 2023 financial results, is seeking to raise N90.7 billion to meet national requirements of N200 billion.
Also, Stanbic IBTC’s directors will seek the approval of shareholders to establish a Debt Issuance Programme of up to N400 billion.
Wema Bank, on its part, is seeking shareholders’ approval to raise N200 billion through a public share offering or private share sale in Nigeria or abroad. The bank’s current capital base is put at N15.1 billion.
ZENITH BANK’S RECAPITALISATION JOURNEY
To meet the new recapitalisation mandate of the CBN, Zenith Bank Plc, one of Nigeria’s top financial institutions, last week, announced plans to raise N290 billion through a combination of a Rights Issue and a Public Offer. This amount is higher than the N230billon, which the bank actually needs to achieve the new capital requirement, given that it already maintains a robust capital base of N270.7 billion.
According to the bank, the rights issue would be offering 5,232,748,964 ordinary shares of 50 Kobo each at N36.00 per share, while the public offer would be presenting 2,767,251,036 ordinary shares of 50 kobo each at N36.50 per share to new investors.
The rights issue affords the existing shareholders the opportunity to purchase additional shares in proportion to their current holdings and offered based on one new ordinary share for every six existing ordinary shares held as of Wednesday, July 24, 2024.
On the other hand, the public offer is open to the general public and aimed at attracting new investors.
Speaking at the well attended Signing Ceremony held on July 29, 2024, at The Civic Centre, Victoria Island, Lagos, Dame (Dr.) Adaora Umeoji, Group Managing Director/Chief Executive Officer affirmed that the N290billion the bank is seeking to raise is slightly above the N230bn required by the top lender to meet the CBN’s minimum recapitalisation requirement.
She expressed optimism in the Rights Issue and Public Offer, declaring that with the level of enthusiasm we have already seen from our existing shareholders for the Rights Issue. Beyond existing shareholders, incorporating a public offer is crucial to ensure that our customers, who are not yet shareholders, can have the opportunity to join in the ownership of this premium brand.”
She added: “In terms of Tier-1 Capital, Zenith Bank has been adjudged by The Banker, Financial Times to be number one in Nigeria and the only Nigerian Bank in the top 600 banks globally. Over the years, we have consistently rewarded our esteemed shareholders.
“Specifically, in the last five years, we have maintained the record as the highest dividend-paying Bank in Nigeria. In 2023, we set a record as the only Nigerian Bank to pay a dividend of N4 per share.”
According to the GMD, proceeds from the capital raise will be channelled towards expanding banking operations across Africa and internationally, investing in technology infrastructure, and supporting working capital on an ongoing basis.
She expressed optimism that given Zenith Bank’s track record of profitability and consistency in creating wealth for shareholders, the capital raise will be a resounding success. She assured prospective investors that Zenith Bank will maintain its leadership in dividend payout in the years ahead and encouraged them to invest in value and invest in Zenith Bank.
CAPITAL MARKETS DAY
Ahead of Zenith Bank’s N290billion Rights Issue and Public Offer announcement, Dr Umeoji had led her team to the bank’s Capital Markets Day, where she showcased the bank’s inherent values to key market players-capital market stakeholders, investors, and analysts.
The event, held on 11 July, 2024, marked the commencement of the bank’s recapitalisation journey and it provided an opportunity for Dr Umeoji to highlight the bank’s growth trajectory, strategic objectives, market performance, and consistent, robust dividend payout over the years.
It also provided an opportunity for her to tell key market players about the bank’s robust risk management culture, adherence to regulations, capital adequacy, and maintenance of low non-performing loan levels.
Addressing the audience, Umeoji stated that Zenith Bank remains dedicated to supporting the growth of the Nigerian economy and providing its numerous customers with innovative and efficient banking solutions.
She also spoke on the bank’s tier-1 capital of N1.8 trillion, shareholders’ funds of N2.3 trillion, market capitalisation of N1.3 trillion, a profit before tax of N796 billion, and a dividend of N4 per share for the year ended December 2023.
Umeoji noted that, given the trend of Zenith Bank’s performance and having achieved a profit before tax of N796 billion in 2023 and N320 billion in the first quarter of 2024, the bank is on track to deliver over N1 trillion in profit before tax in 2024.
She expressed optimism that, with the quality of the board and management and a strong corporate culture, the bank is well-positioned to deliver superior value to investors and other stakeholders and to navigate the recapitalisation process successfully.
The GMD/CEO also unveiled some of the bank’s future plans, which include driving financial inclusion, expanding corporate and retail banking through technology and other state-of-the-art digital platforms, and establishing a fintech subsidiary, ZenPay, to drive profitability. Additionally, the bank intends to expand to France and other Francophone African countries.
“For us at Zenith, we won’t be left out. We are planning to go to the market to raise capital, and as it stands, Zenith Bank has the least amount of capital to raise. We are looking to raise N230 billion because we are already at N270.7 billion. That is the least capital to raise among our peers.
As Umeoji rightly said, Zenith Bank has what it takes- the capacity, the network, the balance sheet, the human capital, the technology and the track record to achieve the CBN recapitalization mandate.
Banking industry analysts have therefore posited that for Zenith Bank, meeting the CBN’s N500billion recapitalization mandate will be a piece of cake with Dame (Dr.) Adaora Umeoji , a consummate banker and workaholic at the helm.
Umeoji assumed office as GMD/CEO of Zenith Bank on June 1, 2024. She took over from Dr. Ebenezer Onyeagwu, whose five-year tenure expired on May 31, 2024.
A banking icon with intimidating professional credentials and experience, Umeoji is the first female GMD/CEO of the bank since the inception in 1990.
She has been the Deputy Managing Director of the bank since October 28, 2016 prior to her elevation and has close to thirty years cognate banking experience of which twenty-six (26) years has been with Zenith Bank.
Umeoji is an alumnus of the prestigious Harvard Business School where she attended the Advanced Management Program (AMP) and an alumnus of Columbia Business School with a Certificate in the Global Banking Program.
She holds a Bachelor’s Degree in Sociology from the University of Jos, a Bachelor’s Degree in Accounting and a First-Class honors in Law from Baze University, Abuja. She holds a Master of Laws from the University of Salford, United Kingdom, a Master in Business Administration (MBA) from the University of Calabar, and also has a doctorate in business administration from Apollos University, USA.
The Zenith Bank boss holds a Certificate in Economics for Business from the prestigious MIT Sloan School of Management, USA, and has attended various management programmes in renowned Universities around the world including the strategic thinking and Management programme at Wharton Business School, USA. She also attended the executive program in Strategic Management, and has a Certificate in Leading Global Business all from Harvard Business School, USA.
She is a fellow of notable professional bodies including the Chartered Banker Institute, UK, Chartered Institute of Bankers of Nigeria, Nigerian Institute of Management, Institute of Credit Administration, Institute of Certified Public Accountants of Nigeria, Institute of Chartered Mediators and Conciliators, and the Institute of Chartered Secretaries and Administrators of Nigeria among others.
In 2022, the Federal Government of Nigeria honored Dr. Umeoji with Officer of the Order of the Niger, as a recognition of her contributions to nation building.