First City Monument Bank, FCMB has revealed plans to source for between
10 and 15 billion Naira of Tier II capital according to its CEO Ladi Balogun.
The bank currently has a capital adequacy ratio (CAR) of 14.8%, 0.2%
less than the CBN regulatory required limit of 15%. Bank’s with CAR less than
approved limits are required to raise capital as well as stop paying dividends.
To raise capital, the CEO also mentioned that it will be focussing on
pitching retail investors rather than institutional investors whom he thinks
will be too expensive.
“For the Tier II we would be looking at anywhere in the range of 10 to
15 billion naira. It’s really going to be targeted at retail because we feel
that the rates from institutions will be high,” he told an analysts’ conference
call. “We have interest from some depositors who want higher yields.”
By targeting retail investors, the bank appears to be abandoning the
preferred route of Institutional investors who are fewer in number and are more
financially savvy. Thus, the bank believes that these investors might ask for
higher yields (returns) considering how desperate the bank is as well as
Nigeria’s economic situation.
Retail investors on the other posse a different challenge as it means
the bank will have to get across to more people to raise the sort of capital it
requires. The public fund raising market in Nigeria is currently lack luster
with investors apprehensive about giving money to banks or indeed any company.
Public offers and right issues embarked upon in the past couple years have
mostly under performed.
FCMB released its 2016 half year results showing pre-tax profits rose by
about 70% to N16.2 billion. This compares to a 78% and 68% decline in profits
for full year 2015 and first quarter of 2016 respectively. The second quarter
results was boosted mostly by an N18.2 billion windfall from foreign exchange
gains. In addition, Mr Balogun intimated Reuters on other strategies by the
bank to ensure that capital was increased. These include reducing the growth
rate of loans, retaining more profits and using buffers offered by its holding
company to ensure that its target was met.
FCMB share price is down 24% year to date and 47% in the last one year.
Retail investors might want to be circumspect about any fund raising exercise.
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