With less than 15 months to recapitalisation deadline, banks have stepped up preliminary consultations on the prospect of business combinations.
The ongoing recapitalisation is heading down to more competitive capital raising ahead of the March 31, 2026 deadline.
As of the last count, only three banks have met the new capital requirements stipulated by the Central Bank of Nigeria (CBN).
Investment banking sources yesterday said there have been “more talks around mergers and acquisitions” as banks consider alternative options to fresh capital raising.
They said while the banks are expected to flood the market with offers, many of them have seen the inevitability of mergers and acquisitions.
The CBN had approved the first mergers and acquisition deal between Providus Bank and Unity Bank in 2024.
Sources, who pleaded anonymity because of business interest, described the investment banking environment’s mood as “contemplative”, with bank chiefs and stakeholders weighing options for the next few months.
Banks were said to be concerned with the painstaking capital verification exercise by the apex bank, which has placed additional burden of proof on banks, in addition to the tedious fund-raising campaign.
The CBN is the final signatory in a tripartite capital verification committee that included the Securities and Exchange Commission (SEC) and Nigeria Deposit Insurance Corporation (NDIC).
The committee is saddled with scrutinising new funds being raised by the banks under the ongoing recapitalization.
Under the guidelines for the recapitalisation, capital verification is a major requirement before the clearance of the allotment proposal and release of the funds to the bank for onward completion of the offer process and addition of the new capital to its capital base.
Out of the seven banks that floated offers in 2024, only three clearances have been granted by the regulatory. Two of the offers – which recorded oversubscriptions, had nearly N3 billion disqualified on the basis of the terms of the offers and capital verification. The other offer recorded half of its target, amidst speculation on the extent of capital rejection by the apex bank.
“Most banks are looking at both share offering and business combinations now, all options are on the table. The most important consideration now is to scale the hurdle, as a standalone or in combined entity,” a senior investment banking source said.
Another source said the recapitalisation would continue to dominate the primary market in the months ahead.
“The primary market will be a beehive of activities this year considering the increased number of banks we are expecting,” another senior investment banker and analyst said.
Access Holdings Plc, Ecobank Nigeria and Jaiz Bank Plc have met the new minimum capital requirements.
FCMB Group Plc, which successfully raised N147.5 billion in 2024 to boost its minimum capital base to N240 billion, needs additional N260 billion additional equity funds to meet the N500 billion requirement for its international banking license.
The bank has indicated plans to launch phases two and three of its capital raising exercise in its determination to retain its international banking license, although it current capitalisation surpasses the N200 billion required for national banking license.
Guaranty Trust Holding Company (GTCO) Plc, which raised N209 billion out of its initial target of N400.5 billion, has also indicated plan to return to the market for the additional funds to retain its international banking license.
Other concluded offers awaiting clearance by the apex bank included Fidelity Bank, Zenith Bank International, Sterling Bank and United Bank for Africa (UBA).
Experts had estimated that banks could raise about N5 trillion within the two-year recapitalisation period.
The CBN had in March 2024 released its circular on review of minimum capital requirement for commercial, merchant and non-interest banks.
The apex bank increased the new minimum capital for commercial banks with international affiliations, otherwise known as mega banks, to N500 billion; commercial banks with national authorisation, N200 billion and commercial banks with regional license, N50 billion.
Others included merchant banks (N50 billion); non-interest banks with national license (N20 billion) and non-interest banks with regional license will now have N10 billion minimum capital. The 24-month timeline for compliance ends on March 31, 2026.
Under the new minimum capital base, CBN uses a distinctive definition of the new minimum capital base for each category of banks as the addition of share capital and share premium, as against the previous use of shareholders’ funds. While several banks have shareholders’ funds in excess of the new minimum capital base, their share premium and share capital significantly fall short of the new minimum definition.
