The next few weeks may be challenging for the managing directors of four banks, their management, and employees as strategic decisions needed to be made may not be according to their plans as regards their recapitalisation drive.
Investigation by our correspondent revealed that the banks are jittery following the decision of the Central Bank of Nigeria (CBN) to approve the ‘acquisition’ of Unity Bank, last week, to prevent another occurrence of bank failure, reports Daily Independent.
On March 28, 2024, the CBN issued a circular announcing a new recapitalisation policy for commercial, merchant, and non-interest banks in Nigeria, effective from April 1, 2026.
The CBN stipulated that the minimum capital requirement for banks will consist solely of paid-up capital and share premium. This means that banks must have the actual funds contributed by shareholders (paid-up capital) and any additional amounts paid by investors for shares above their face value (share premium) to comply with regulatory standards.
The CBN directed deposit money banks to strengthen their capital base.
According to the CBN’s recapitalisation circular, commercial banks with international authorisation are required to raise their capital base to N500 billion, while national banks must reach N200 billion.
Additionally, banks with regional authorisation are expected to establish a minimum capital threshold of N50 billion.
To meet these requirements, the CBN has specified three options for banks to raise the minimum capital, and strict adherence to these options is mandatory. Any alternative methods will not be accepted.
The three options are, injection of funds through private placements, rights issues and/or offers for subscription, mergers and acquisitions and upgrade or downgrade of licence authorisation.
Though, these four banks have submitted their plans for recapitalisation, the CBN seems not convinced as to their workability.
A source close to the CBN informed our correspondent that these banks may not be able to keep their current identities as two of these banks have expressed desire to downgrade to regional banks while the other two are still struggling to keep the national licence.
For instance, one of the banks with strong footings in the South-West and one of the oldest indigenous banks in the country, believes that it will scale the national licence hurdle.
An executive director of the bank, who spoke to our correspondent recently, was full of enthusiasm that the bank may keep its national commercial licence but feelers are pointing to a possible downgrade to a regional bank where it has operated before the elevation to national banking licence about eight years ago.
The bank, after a recent rights issue, is at N55 billion after realising N40 billion.
One of the banks suffered a big dip, last week, when respected rating agency, Fitch, downgraded it’s Long-Term Issuer Default Ratings (IDR) to ‘CCC’ from ‘B-’ and its National Long- Term Rating to ‘B+(nga)’ from ‘BBB(nga).
The bank also had its Viability Rating (VR) downgraded to ‘CCC’ from ‘b-’ over concerns of breaching capital requirements.
In its rating released on Friday, Fitch also affirmed the bank’s Government Support Rating (GSR) of ‘no support’.
“The downgrades reflect the Fitch-estimated prolonged breach of the bank’s total capital adequacy ratio (CAR) requirement of 10 percent and uncertainties regarding the timeline for restoring compliance.
“Near-term prospects will depend on continued sound internal capital generation and a timely execution of the recapitalisation plan agreed by new management with the Central Bank of Nigeria (CBN),” Fitch said.
One of the banks, which was rescued in 2022 by the CBN is said to be having difficulty in getting a suitor as those they have spoken to are wary of possible backlash of the acquisition of a bridge bank the bank bought many years ago.
A source close to the bank told our correspondent that the concern of the staff of the bank is no more on the list of losing identity but the fear of job loss.
“We are all afraid that many people will be laid off if the eventual merger or acquisition happens”, the source said.
