FBN Holdings, the parent of First Bank of Nigeria, has launched a ₦150 billion rights issue as it works to meet new capital requirements set by the Central Bank of Nigeria (CBN). Earlier this year, the CBN raised the minimum capital requirement for Nigeria’s largest banks from ₦50 billion to ₦500 billion, reflecting a tenfold increase aimed at strengthening the financial sector’s resilience. To meet this, FBN Holdings is taking a multi-step approach, starting with this rights issue and planning for additional capital raises in the near future.
Rights Issue Structure
FBN Holdings will offer nearly 6 billion shares at ₦25 per share to existing shareholders, with the offering open until December 12, 2024. According to Group Managing Director Nnamdi Okonkwo, this initial ₦150 billion issuance is part of a larger strategy, as the bank plans to seek approval for an additional ₦350 billion raise at its next Annual General Meeting (AGM). Upon completion, the bank’s capital could reach ₦730 billion—₦230 billion above the CBN’s required threshold.
Strategic Capital Allocation
FBN Holdings has outlined a clear plan for deploying the capital:
- Strengthening First Bank’s Capital Adequacy Ratio (CAR): The company will allocate ₦103.12 billion (about 69% of the proceeds) to boost the CAR of First Bank, its core banking subsidiary. This step will ensure that First Bank remains compliant with regulatory standards and has the financial cushion to manage potential risks.
- International Expansion: Roughly ₦29.46 billion (20%) will be dedicated to expanding First Bank’s international footprint. Okonkwo noted that this growth would take a measured approach, aligning with the bank’s broader diversification and risk management strategy.
- Digital Transformation and Innovation: Around ₦14.73 billion (nearly 10%) is earmarked for upgrading First Bank’s digital infrastructure. This includes investments in digital banking, automation, and core banking technology to cater to customer demands for seamless, remote transactions. This tech-driven approach aligns with a sector-wide shift, as other tier-1 banks in Nigeria have recently enhanced their core digital systems.
Rationale for the Rights Issue
With inflation rising, banks face increased pressure to improve operational efficiencies and diversify income streams. FBN Holdings has touted its diversified business model—spanning retail, agent banking, and other financial services—as a key asset, helping it to weather economic uncertainties. The company’s agent banking network, which holds a significant 20% market share, further positions it as a leading player in Nigeria’s financial services landscape.
In addition to its structural investments, FBN Holdings’ recent financial performance has shown resilience. The company reported a 128% increase in profit before tax, reaching ₦1610.9 billion for the nine months ending September 2024. This growth coincided with the sale of its merchant banking arm, FBNQuest Merchant Bank, to EverQuest Acquisition LLP in September, freeing up resources for the core banking and tech-focused initiatives.
Industry-Wide Capital Raising Trend
With this rights issue, FBN Holdings joins other major Nigerian banks—including GTCO, Access Holdings, and Zenith Bank—in taking proactive steps to meet CBN’s new capital requirements. Bloomberg reports that these banks collectively raised ₦1.26 trillion, underscoring the industry-wide effort to bolster capital reserves amid regulatory and market pressures.
FBN Holdings’ capital raise also reflects the increased need for technological advancements and customer-centric services in Nigeria’s banking sector, as the country’s digital and cashless economy continues to evolve. As the rights issue progresses, FBN Holdings will leverage these funds to position itself as a leader in both traditional and digital financial services, ultimately aiming to enhance shareholder value and customer experience.