Business
Access, Zenith banks lead in N500bn recapitalization program
…as Union, Sterling, others opt for national licence
Deposit Money Banks (DMBs) operating in the country have intensified efforts at meeting the new capital threshold announced in 2023 by the Central Bank of Nigeria (CBN) in an attempt to avoid the last-lap chaos usually associated with such an exercise.
Business Hallmark findings revealed that with the countdown to the CBN’s March 2026 deadline already on, the 34 financial institutions, including those with international, national, and regional licenses, have made significant progress in the race to raise their capital base to the acceptable threshold stipulated by the apex bank.
While some, especially tier-1 banks, have gone outrightly for public offers and rights issues, others are trying their luck with mergers and acquisitions, as well as private placements in the bid to meet the new paid-in capital requirements.
It would be recalled that the CBN had, on March 28, 2024, announced the commencement of the much-awaited recapitalization exercise for DMBs, which mandates substantial increases in their minimum capital base according to their scope of operations.
For instance, while commercial banks that want to get international licences will need to upgrade their capital base to N500 billion, national banks must be capitalized to the tune of N200 billion, regional banks N50 billion, non-interest banks seeking national licence N20 billion and non-interest banks seeking regional approval N10 billion.
According to CBN’s acting Director of Corporate Communications, Sidi Ali, the apex bank will not allow banks Shareholders’ Fund as part of the new capital requirement, which she insisted must consist solely of paid-up capital and share premium.
Sidi Ali advised the banks to consider raising fresh equity capital through rights issues, private placements, and offers for subscription, as well as pursuing mergers and acquisitions, and that they are all required to meet the minimum capital requirement on or before March 31, 2026, she
“The minimum capital shall comprise paid-up capital and share premium only and shall not be based on the Shareholders’ Fund.
“Additional Tier 1 (AT1) Capital will not be eligible for meeting the new requirement. Despite the increase in capital, banks must ensure strict compliance with the minimum Capital Adequacy Ratio (CAR) requirement applicable to their license authorization”, the CBN circular had stated.
The announcement that the new capital requirement for financial institutions shall be restricted to paid-up capital and share premium, however, caught stakeholders in the banking industry napping, with many of them erroneously concluding that virtually all the financial institutions, especially tier-1 banks, had already surpassed any figure that might be announced by the CBN
They had largely based their assumptions on the belief that the CBN would allow the banks to add their Shareholders’ Fund to their paid-up capital and share premium in the computation of their capital bases.
But with the CBN’s exclusion of banks shareholders’ fund from the minimum capital requirement, all the bank fell short of the new requirement.
For instance, Zenith Bank’s capitalization, which stood at N2.07 trillion (with the addition of its Shareholders’ Funds) before the apex bank’s new requirement, fell to N270.75 billion. Zenith Bank will need an additional N229.26 billion to scale the new requirement.
Also, Access Bank, with a capitalization of N1.92 trillion pre-CBN’s announcement, is now left with only N251.81 billion and will need an additional N248.19 billion to reach the new threshold.
Likewise, Ecobank, with a post-CBN announced capital base of N353.51 billion, must raise N146.49 billion to remain an international bank; First Bank of Nigeria Holdings Plc with N251.34 billion must raise another N248.66 billion to retain its licence; GTBank with N138.19 billion capital base must scale up by another N361.81 billion; Fidelity Bank with N115.31 billion, will need to raise N384.70 billion; FCMB with N125.29 billion must secure additional N374.71 billion in capital; while UBA will need to raise additional N384.18 billion in addition to its current capital of N115.82 billion.
Also, Stanbic IBTC, with N109.26 billion in capital, will need to raise N390.74 billion. Sterling Bank with N57.15 billion, on the other hand, must source for a whopping N442.85 billion.
Frontrunners to the Tape
However, findings at the weekend revealed that many of the banks have made significant progress in their quest to scale the hurdle, with Access Bank Plc and Zenith Bank Plc, the biggest bank in Nigeria, leading the pack by not only meeting the new recapitalisation threshold but surpassing it.
According to available records, Access Holdings, the parent company of Access Bank of Nigeria, has successfully concluded its capital-raising exercise. Last year, the bank had given its shareholders the chance of owning more shares in the bank by offering them 17.772 billion new shares through rights issues.
At the end of the exercise, which closed in August 2024, ABN Plc was able to raise over N351 billion from the 17.772 billion new shares sold at N19.75 each, thus becoming the first financial institution to meet the CBN’s N500 billion minimum capital requirement to operate an international license.
As things stand, ABN’s share capital has risen to N602.81 billion, N102.81 billion more than the minimum requirement.
Announcing the cheering news at the beginning of the year, Access Holdings Plc informed its shareholders and the public that it had secured full approvals of regulatory agencies, the Securities and Exchange Commission (SEC) and the CBN for the completion of the whole process.
According to the Secretary of Access Holdings Plc, Mr. Sunday Ekwochi, the success from the capital mobilization had ensured that the company’s flagship subsidiary, Access Bank of Nigeria (ABN), emerged as the first financial institution to meet the CBN’s minimum capital threshold, well ahead of the deadline date.
Also speaking on the remarkable feat, the Chairman of Access Holdings, Mr. Aigboje Aig-Imoukhuede, said the firm was pleased to be the first bank to breast the tape.
“The success of the Rights Issue demonstrates the resilience of Nigeria’s capital market and reinforces our shareholders’ confidence in the present value and potential of our company.
“We deeply acknowledge the invaluable and strong support of the Central Bank of Nigeria and the Securities and Exchange Commission, who both played crucial roles in ensuring the integrity and efficacy of our rights issue exercise.
“We are also grateful to our valued shareholders, whose loyalty to the Access brand and vision for over 22 years has been most inspiring and unwavering”, Aig-Imoukhuede stated.
In the same vein, tier-1 bank, Zenith Bank Plc, has passed the recapitalization hurdle after it successfully raised N350.4billion through its recently concluded hybrid Rights Issue and Public Offer.
In a statement released to the Nigerian Exchange (NGX) Group in January, the bank disclosed that it had secured the full regulatory approval of the CBN and the SEC in respect of the Hybrid Offer, comprising of a Rights Issue of 5,232,748,964 Ordinary Shares of 50k each at N36.00 per share and Public Offer of 2,767,251,036 Ordinary Shares of 50k each at N36.50 per share.
The Public Offer was 160.47% subscribed, with a total of 4,440,587,250 Ordinary Shares allotted based on the terms of the Offer and the CBN’s Capital Verification Exercise. The Rights Issue was also 100.18% subscribed with a total 5,232,748,964 ordinary shares allotted.
Added to the existing N270.75billion share capital, the realized funds pushed Zenith Bank’s current share capital to N621.15billion, N121.15billion above the CBN requirement.
Speaking on the feat, the Group Managing Director/Chief Executive of Zenith Bank Plc, Dr.Adaora Umeoji, said it would strengthen the bank’s capital base, enhance its competitive edge, and position it for sustainable growth and profitability.
“The success of our combined Rights Issue and Public Offering is a testament to the strong confidence and trust that our shareholders, investors, and stakeholders have in Zenith Bank’s vision, strategy, and brand.
“This landmark transaction underscores our commitment to strengthening our capital base, enhancing our competitive edge, and positioning ourselves for sustainable growth and profitability.
“We deeply acknowledge the invaluable and strong support of our regulators, the Central Bank of Nigeria and the Securities and Exchange Commission, and are grateful for their guidance in ensuring the integrity and efficacy of the exercise.
“This successful transaction will enable us to continue delivering value to our stakeholders, while also contributing to the growth and development of the economy”, she stated.
The management of other banks involved in the process of raising funds are not handling the recapitalization exercise with levity.
Mindful of the unfortunate fate that befell some of their colleagues who did not take the 2005 recapitalization exercise with the seriousness it deserved until it was too late, the management and executives of other banks have also intensified efforts at raising the desired amounts needed to meet CBN’s requirements.
Awaiting Group
Some of the banks whose recapitalization efforts have reached advanced stages include First Bank of Nigeria Plc, GTBank, UBA, Fidelity Bank, and Wema Bank.
Top on the list is GTBank, which raised its share capital to N347.19 billion from the initial N138.19 billion after raising N209 billion from the first phase of its phased equity capital raise programme.
GTBank’s parent company, GTCO, it would be recalled, had launched a public offer of 9.0 billion ordinary shares of 50 kobo each at N44.5 per share.
According to the group, the offer, which garnered substantial interest from domestic retail investors, raised a total of N209.41 billion from 130,617 valid applications for 4.706 billion ordinary shares, fully allotted.
“This milestone concludes the first phase of GTCO’s phased equity capital raise programme, which is structured on a balanced allocation strategy based on an equal split between institutional and retail investors.
This balanced approach aligns with GTCO Plc’s commitment to fostering a well-diversified and robust investor base”, GTCO stated.
GTCO yesterday announced the receipt of regulatory approval for a total of N209.41 billion, representing 52.3 percent of the total offer size.
The bank now has about 12 months left to raise the remaining balance of N152.81 billion needed to hold on to its international license.
Another tier-1 bank, First Bank of Nigeria (FBN) Plc, is in the process of wrapping up its N500 billion equity capital drive through rights issues. By the time the exercise concludes before the end of first quarter of 2025, FBN’s share capital would increase to N730 billion from the initial N230billion pre-recapitalization.
Findings also revealed that FCMB and United Bank for Africa (UBA), who had completed the first phase of their recapitalization exercise by raising N145 billion and N150 billion, respectively, still have shortfalls of N252 billion and N120 billion, respectively.
Other DMBs, it was gathered, have also completed the first phase of their capital drive and are on course to beat the CBN deadline through equity injections and mergers and acquisitions.
BH gathered at the weekend that some mid-sized banks that are not sure of meeting the CBN requirement before the March 31, 2026, deadline date, are considering merging or downgrading their licences.
Sources in the banking industry informed our correspondent that two mid-sized banks, Unity and Providus, are in talks to merge.
“That’s the only discussion in the market for now for mergers and acquisition; but I won’t be surprised if more candidates join the discussions in the next few months, said a banking industry expert, who did not want his identity disclosed.
While this information could not be confirmed before the paper rounded up production, BH gathered that the executives of some DMBs, including Wema, Sterling, Heritage, and Union Bank, have resolved not to pursue international banking licences, which will require them to raise their capital base to N500 billion.
“A national licence will suffice. We don’t need to break our heads for nothing since we don’t have foreign subsidiaries. So, we only need to capitalize to the tune of N200 billion”, an executive in one of the mid-sized banks informed our correspondent.
Financial experts who spoke on the matter said they are hopeful that banks that are yet to meet the required capital will find one way or the other to meet CBN’s requirements before the deadline.
‘’This optimism is premised on the expectation that the plans to further raise capital either by way of private placement, sale of stake in wholly owned subsidiaries or public offers, will materialize before deadline,’’, said Tajudeen Ibrahim, an analyst at Chapel Hill Denham Limited.
