Business
Recapitalisation: FCMB sets ambitious goal for second phase of capital raise
After successfully completing the first phase of its capitalization programme, financial services holding company, FCMB Group, will be taking the exercise to the second phase, selling minority interests in one or two of its subsidiaries.
In March the CBN announced a ten-fold jump in minimum capital requirements for banks, two decades since the last exercise. FCMB, like other lenders with international license, is required to raise N500 billion and currently needs N375 billion to maintain its international license.
To meet the requirement, the CBN gave the banking sector three options, including the issuance of new common shares (by way of the public offer, rights issues, or private placements), mergers and acquisitions, and the upgrade and downgrade of their respective licence category or authorisation.
Several banking groups, like Access Holdings, FBN Holdings, Guaranty Trust Holding Company Plc, Zenith Bank, and United Bank for Africa, are already on the move to raise funds from both the domestic and international capital markets.
FCMB kicked off the programme with a Facts Behind the Offer (FBO) session held at the Nigerian Exchange (NGX), highlighting the Group’s robust financial performance and underscoring why it presents a compelling investment opportunity.
The Group commenced its public offer of 15.197 billion shares at N7.30 per share, amounting to N110.9 billion, on July 29, 2024, and was expected to close on September 4, 2024.
The Group Chief Executive Officer, Mr. Ladi Balogun, had at the event explained that the public offer was part of the bank’s comprehensive plan to meet the CBN capitalization requirements, adding that in addition to it, the Group had adopted a phased approach to raise up to N397 billion additional capital to drive its diversification plans.
He stated: ”FCMB is growing at approximately two million customers a year, and we believe that growth rate will accelerate. In banking, we are about number seven in net assets and among the top five Pension Fund Administrators (PFA) in the country.
“Our goal is to sustain and grow earnings per share for our investors despite our additional share issuance. The proceeds from this capital raise will primarily drive business growth, focusing on lending to key sectors, such as agriculture, SMEs, and non-oil exports, which we believe are vital for Nigeria’s development”.
“We’ll also be using it to invest in technology to strengthen our cyber security. It will also help us reduce our own cost of doing business and not just our own financial cost, but our cost to the planet in terms of carbon footprint. It will also be used in investing in human capital.”
According to FCMB, the second phase will be selling minority interests in one or two of its subsidiaries, where it hopes to generate between 80 to 100 billion naira, to get to about 250 billion naira. The third phase; it said, will involve a private placement towards the end of next year.
Critical to success
Speaking on the completion of the first phase of the Group’s recapitalization, Balogun acknowledged the role of CBN), the Securities and Exchange Commission (SEC), and NGX Group, without which, he said, the exercise would not have been a success.
According to him, while the CBN provided forward-thinking leadership, the SEC played a critical role in enhancing market confidence and providing essential guidance during challenging times. He also recognized NGX Group and the NGX Invest platform for their significant contributions, which enabled 40,000 investors to participate in the public offer through digital means.
Balogun highlighted that the capital raised would strengthen FCMB’s balance sheet, improve customer banking experiences, support community initiatives, and create value for shareholders. He emphasized that this effort would play a vital role in economic transformation, nation-building, and reshaping the narrative of Africa.
He expressed optimism about the future of FCMB Group, viewing the successful capital raise as a crucial step towards promoting shared prosperity and building a better future for generations to come.
Last week, the Chief Executive Officer of FCMB, Yemisi Edun, stated that the ongoing recapitalisation exercise would unlock improved credit facilities for enterprises at a reduced rate, calling on financial institutions to increase funding for SMEs.
The lender clinched dual honours at the Development Bank of Nigeria 2024 Annual Lecture Series and Awards. It was named the “Best Bank with the Highest Impact on MSMEs Accessing Credit for the First Time in Nigeria” and “Highest Disbursement to Sustainability Projects”.
Speaking in numbers
The banking group, in its audited report for 2023, declared N104.4bn in profit before tax, indicating 186 percent year-on-year growth, with divisions of the group recording robust earnings growth; banking group at 212.6 percent, consumer finance at 67.3 percent, investment management at 40 percent, and investment banking at 89.7 per cent.
The gross revenue of FCMB Group rose by 82.5 per cent to N516.4bn from N283bn, driven by a 61.7 per cent growth in interest income and a 154.4 per cent growth in non-interest income.
Net interest income grew by 44.8 per cent from N122bn to N176.6bn last year, on the back of growth in the yield on earning assets.
Increases in personnel costs, regulatory costs, technology-related costs, and general inflationary pressures pushed the banking group’s operating expenses up by 38 per cent year-on-year to N157.2bn, while its digital revenue improved by 62.4 per cent in 2023 to N60.3bn from N37.1bn in the previous year.
Similarly, according to the 2024 half year financial statement presented to the NGX, impressive growth in gross earnings of N374.49 billion against N238.18 billion in H1 2023, an increase of 57.2 percent, contributed to a Year-on-Year (YoY) increase of 38 percent in Profit Before Tax (PBT) from NN38.23 billion in H1 2023 to N64.20 billion during the period.
Profit After Tax (PAT), followed the same growth trajectory, as the Tier-2 financial services institution recorded a 68 percent rise to N59.48 on H1 2024 billion from N35.40 billion in the preceding year
