Business
Recapitalisation: Stanbic IBTC navigates equities, debt markets to boost capital base
Stanbic IBTC Holdings Plc is riding on a combination of rights issue and debt issuance program to meet the new capital requirement set by the Central Bank of Nigeria (CBN).
The CBN raised the minimum capital base for commercial banks holding national authorisation to N200 billion, and those with regional authorisation to N50 billion. Also, banks with international authorisation now need N500 billion as the minimum capital to retain their licenses.
On November 5, 2024, Stanbic IBTC Holdings Plc received the approval of the Nigerian Exchange Limited (NGX) for a proposed Rights Issue of about N150billion, according to a recent report by NGX.
During the Annual General Meeting (AGM) held on May 16, 2024, in Lagos, shareholders had approved plans by the holding company to raise a total of N550 billion in new debt and equity capital, as the company seeks to meet the new minimum capital base.
Regulatory filings had indicated that shareholders mandated the company to raise N,150 billion through a rights issue or public offering and to set up a N400 billion debt issuance programme.
Stanbic IBTC Holdings’ flagship subsidiary, Stanbic IBTC Bank Limited needs about N91 billion new equity fund to meet the new minimum capital base of N200 billion required for its national banking licence. Stanbic IBTC currently has share capital and share premium of N109.25 billion. It however has shareholders’ funds of N506.924 billion.
The N150 billion new equity capital raising is expected to increase the share capital and share premium of the company to about N260 billion, above the new minimum capital requirement of N200 billion share capital and share premium for national bank.
Shareholders authorized the company “to raise additional equity capital of up to N150 billion by way of a rights issue or offer for subscription on such terms, tranches, conditions and dates as may be determined by the directors”.
Shareholders also granted waivers allowing the board to offer unsubscribed shares first to interested existing shareholders and later, if remaining, to interested investors on similar terms to the rights issue or offer for subscription.
The company also received shareholders’ approval to reaffirm a dividend conversion scheme under which shareholders may be permitted to elect to receive new ordinary shares in the company, credited as fully paid, instead of the whole or any part of any cash dividends declared by the company.
Such authorisation for dividend conversion shall subsist until the earlier of five years from the date of the passing of the resolution and the date on which the annual general meeting of the company to be held in 2029 occurs.
Under the resolutions, directors were authorized to issue such new ordinary shares and make such allotments of shares or approve any allotment proposals as may be deemed necessary and expedient to give effect to the dividend conversion scheme, subject to obtaining the approvals of the relevant regulatory authorities.
Following the completion of the additional equity capital raise, the issued and paid up share capital of the company would be increased from N6.478 billion divided into 12.957 billion ordinary shares of 50 Kobo each to a maximum of up to N8.25 billion by the creation of up to 3.54 billion ordinary shares of 50 Kobo each.
Debt avenue
Under the debt capital raising, shareholders authorized the board “to establish a debt issuance programme in an amount of up to N400 billion or such foreign currency equivalent thereof as the directors may consider appropriate, for the purpose of issuing debt securities-to include senior unsecured or secured, subordinated, convertible, preferred, equity linked or such other forms of debt obligations, by way of public offering, private placement, additional tier one or tier two capital raising, investments, book building process or any other method, in tranches of such amounts and at such dates, coupon or interest rates and upon such terms and conditions as may be determined by the directors, subject to the grant of all required approvals from the relevant regulatory authorities”.
Kunle Adedeji became the acting Chief Executive of Stanbic IBTC Holdings with effect from November 1. Adedeji brings a wealth of experience and a strong track record of leadership within the organisation.
In its unaudited consolidated and separate interim financial statements for the nine months to (9M) to September 30, 2024, Stanbic IBTC Holdings Plc reported gross earnings of N649.531billion as against N331.624billion in 9M’2023, representing 95.9 percent increase.
Profit Before Tax (PBT) also closed high at N222.931billion from N129.458 in 9M’23, up 72.2 percent, while Profit After Tax (PAT) of N182.871billion in 9M’24 represents an increase by 67.4 percent, from N109.249 billion in 9M’23.
Blessing Ishola, Lagos-based Coronation Research analysts in their October 28 note to investors said that Stanbic IBTC Holdings core revenue streams supported its nine months (9M) performance.
“Stanbic IBTC Holdings released its 9M 2024 results after close of business on Friday October 25, 2024. The results showed 72.2 percent year-on-year (y/y) growth in pre-tax profits and 68.5 percent y/y growth Net profits. Analysing Q3 24 performance alone, pre-provision operating profit rose 4.8percent quarter-on-quarter but net profits declined by 5.9 percent quarter-on-quarter (q/q) due to margin pressure.
“On balance, earnings were supported by growth in Interest Income (+130.7percent y/y), which is primarily attributable to improved market yields during the period. This supported income from investment securities and loans & advances to customers,” the Coronation research analyst said among other notes in the results first look.
“Overall, the performance reflects strong growth in core revenue streams. Although asset quality shows some signs of stress, as evidenced by the rise in the NPL ratio and Cost of Risk, we attribute this to the group having a proactive approach to provisioning for losses, given the current macroeconomic headwinds and this reflects the group’s commitment to safeguarding financial stability.
“We expect elevated market yields to support income from core banking activities for the rest of year. On recapitalisation, the group received approval to raise N550billion through a combination of a N150billion rights issue and a N400 billion debt issuance programme at its Annual General Meeting in May: however, modalities are yet to be officially communicated,” Ishola noted.
Stanbic IBTC Holdings, commonly referred to as Stanbic IBTC, is a financial service holding company in Nigeria with subsidiaries in Banking, Stock Brokerage, Investment Advisory, Asset Management, Investor Services, Pension Management, Trustees, Insurance Brokerage and life Insurance businesses