Business
Recapitalisation: FBN Holdings plans strategic expansion driven by ambitious target
First Bank of Nigeria (FBN) Holdings is setting a record of exceeding the Central Bank of Nigeria’s (CBN) minimum recapitalisation requirement of N500 billion as it targets N730 billion capital base by the first quarter of 2025.
The aspiration received a prominent boost at the company’s 12th Annual General Meeting (AGM), conducted virtually on Friday when the shareholders unanimously gave their approval for the capital raise of up to N350 billion by the year 2025.
Recall that the outgoing Group Managing Director (GMD), Dr Nnamdi Okonkwo, had while speaking to the capital market community on the Exchange during the ‘Facts Behind the Rights Issue” presentation recently, outlined the Group’s comprehensive strategy, which began with the raising of an N150 billion rights issue exercise on November 4, 2023.
Okonkwo noted that the Group’s capital base currently at N230 billion will be bolstered through its ongoing Rights Issue and subsequent capital-raising strategies which had already been outlined.
Also, the Chairman, FBN Holdings, Mr. Femi Otedola had in a statement from the document urged shareholders that: “By supporting the Rights issue through accepting your rights, the company will be well positioned to achieve its strategic objectives and to deliver improved returns to all stakeholders, going forward.”
He added: “I, therefore enjoin you to carefully consider this investment opportunity and take up your rights, in full, as the company continues to harness imminent opportunities and deliver on its promises.”
The rights issue offering comprising 5,982,548,799 ordinary shares of 50 kobo each at N25.00 per share goes to its existing shareholders on the basis of one new ordinary share for every six ordinary shares held as of October 18, 2024.
Extracts from the offer raising prospectus of the financial institution revealed that lending to the corporate business segment gets N77.34 billion, while lending to retail business segment gets a budget of N25.78 billion. This covers 68.95 per cent of the N150 billion proposed rights issue the management seeks to raise from existing shareholders.
Out of the N150 billion, a total of N29.46 billion was budgeted to support international business expansion and N14.73 billion for investment in automation and digital banking.
Further look into the dealings of the company revealed that the decision to raise N350 billion will be through various financial instruments and opportunities such as public offerings, private placements, and rights issues in both local and international capital markets.
The pricing mechanisms for these activities will be determined through rigorous valuation methods such as book building processes, ensuring transparency and fair market value.
The CBN had in March directed commercial banks in Nigeria with international authorisation to shore up their capital base to N500 billion and national banks to N200 billion.
The recapitalisation is expected to among other things lead to strong banks that are expected to lend more money to businesses and individuals, stimulate economic growth; a more stable and secure banking system capable of attracting greater foreign investment; and improved financial health which will lead to a more stable foreign exchange market.
Using the proceeds
Speaking of the use of the proceeds from the rights issue, Okonkwo noted that it will be channeled into strengthening the operations of FirstBank, as well as financing digital banking expansion, automation, and investments across its international branches.
“The bank also plans to deepen its footprint in strategic markets, including key African economies and its existing presence in the United Kingdom, France, and China.
“This infusion of capital allows us to be more competitive on a global scale and reinforces our commitment to innovative, customer-centric services,” Okonkwo noted.
At the AGM, Dr. Alimi Abdul-Razaq, representing the Chairman of FBN Holdings, Mr. Femi Otedola, clarified further on how best the company intends to reinvest the proceeds of the exercise with a view to yielding reasonable returns.
Abdul-Razaq said: “It is important to note that these funds will be allocated carefully and strategically to support the bank in achieving its objectives and fulfilling its obligations to its stakeholders.
“The prudent use of these combined funds will enable the bank to strengthen its financial position, enhance its operational capabilities, and better serve its customers and the community at large.
“This significant capital injection reflects the company’s commitment to sustainable growth and value creation, while also ensuring compliance with regulatory requirements and industry best practices.
“As we move forward with this proposal, we remain dedicated to transparent communication, effective governance, and responsible decision-making to secure the long-term prosperity and success of the firm.”
In terms of performance, the Group reported impressive financials for the first nine months of 2024, with net interest income rising by 132 per cent to N873 billion and non-interest income climbing 82.5 per cent to N585 billion. Total assets grew by 62 per cent to N27.5 trillion, while the loan book expanded 47 per cent to N9.4 trillion, and customer deposits increased by 57 per cent to N16.7 trillion.
“Despite the macroeconomic headwinds, these numbers reflect our commitment to creating value for our shareholders,” Okonkwo asserted.
The bank’s Return on Average Equity (ROAE) rose to 32.8 cent, up by over 10 percentage points from 2023, while Return on Average Assets (ROAA) increased from 2.3 per cent to 3.2 per cent.
On the operational front, FBN Holdings has achieved a 13 per cent compound annual growth rate (CAGR) in operating expenses over the past five years.
The shareholders also approved the appointment of Mr. Adebowale Oyedeji as the incoming GMD. Oyedeji, a seasoned professional with a proven track record in the financial sector succeeds Mr. Nnamdi Okonkwo who is about to complete his tenure.
First Bank of Nigeria (FBN) Holdings Plc also received approval to change the company’s name to First Holdco Plc.
“That there should be a change of the legal and brand names of the company from FBN Holdings Plc and FBN Holdings to First Holdco Plc and FirstHoldco, respectively,” FBN Holdings said.
