FBN Holdings, the parent company of Nigeria's longest-standing banking institution, commenced its ₦150 billion rights issuance on Wednesday. In response to the Central Bank's directive issued in March 2024 to increase capital requirements tenfold for the nation's major banks, Nnamdi Okonkwo, the Group Managing Director of FBN Holdings, revealed that the bank's capital-raising strategy was initiated in 2023.
"We recognized the level of capital we needed and opted for a ₦150 billion issue. At our upcoming Annual General Meeting, we will seek approval to raise an additional ₦350 billion," Okonkwo stated during a presentation at the Nigeria Exchange Limited (NGX).
The bank plans to offer 5,982,548,799 shares at 50 kobo each to its shareholders at a price of ₦25.00 per share, with the rights issue set to close on December 12, 2024.
"We currently have ₦270 billion, and the Central Bank has advised us to increase to ₦500 billion. We are proceeding with ₦150 billion now, and at our next AGM, we will request shareholder approval for an additional ₦300 billion. Once completed, our total capital will reach ₦730 billion, exceeding the regulator's required capital by ₦230 billion," Okonkwo explained.
FBN Holdings is the fourth tier-1 banking group to undertake a capital raise to comply with regulatory requirements, joining Guaranty Trust Holding Company GTCO, Access Holdings, and Zenith Bank Plc. According to Bloomberg, five of Nigeria's largest banks collectively raised ₦1.26 trillion.
Despite the capital raise occurring in a context of rising inflation, FBN Holdings maintains that its diverse portfolio, which includes multiple subsidiaries, presents a compelling case for shareholders. The bank boasts the largest agent banking network in Nigeria and holds a 20% market share.
"Our diversification is intentional, and we regularly assess our portfolio to determine areas for enhancement, divestment, or reduced focus. By leveraging our varied businesses and shared resources, we aim to achieve more with less," Okonkwo concluded.
FBN Holdings announced a pre-tax profit of ₦1610.9 billion for the nine-month period ending September 2024, marking a significant increase of 128% from the same period last year. Additionally, in September 2024, the company divested its merchant banking division, FBNQuest Merchant Bank Limited, to EverQuest Acquisition LLP.
FBN Holdings has outlined its plans for the funds raised. A portion will be allocated to recapitalize its primary asset, First Bank, while the remainder will focus on fostering innovation and enhancing digital capabilities throughout the organization.
Specifically, FBN Holdings intends to invest ₦103.12 billion, representing 68.95% of the total, to strengthen the capital adequacy ratio (CAR) of First Bank. Additionally, ₦29.46 billion, or 19.7% of the proceeds, will be directed towards international expansion, which will be approached gradually.
In line with other leading tier-1 banks, FBN Holdings is reassessing its technological strategies. Since the latter half of 2024, Nigeria's largest banks have been modernizing their core banking systems.
Furthermore, FBN Holdings plans to allocate 9.85% of the capital raised—₦14.73 billion—towards enhancing First Bank's digital banking infrastructure and automation processes.
"We are technology-driven because our customers expect to conduct transactions seamlessly from their vehicles, homes, and other locations," the company stated.