On Thursday Nigeria’s Sterling Bank disclosed it would seek shareholder approval on November 11, to raise to $320 million in debt or equity. The bank also said it would issue up to N19.8 billion ($120.3 million) worth of shares to a strategic investor via a private placement at N2.65 each.
The mid-tier bank joins an elongating queue of Nigerian banks seeking to boost their capital adequacy ratio, most of whom are looking to right issues. Recently, Diamond Bank and Unity Bank have boosted their capital through rights issue. Access Bank has announced it will begin it’s share offer in November, First Bank , Skye Bank First City Monument Bank Limited, Heritage Bank Limited are expected to follow suit, while the United Bank for Africa (UBA) last Friday announced that it is commencing the process of raising Tier 1 capital by way of rights issue.
For the reason for the rush for capital, analysts point to the capital adequacy ratios for most Nigerian lenders which have dropped by 100-400 basis points this year to near the regulatory minimum of 16 percent under stricter international requirements, expecting some would have to lower dividends and loan growth this year to preserve cash.
The CBN had earlier classified eight Nigerian banks – First Bank of Nigeria Limited (FirstBank), Zenith Bank Plc, Guaranty Trust Bank Plc (GTBank), United Bank for Africa Plc (UBA), Access Bank, Ecobank Nigeria Plc, Diamond Bank Plc and Skye Bank Plc – as Systemically Important Financial Institutions (SIFIs) and imposed on them a new set of rules, requiring them to maintain a minimum CAR of 16 per cent.
However, analysts also say that the need for Skye and Heritage Banks to raise more capital would become more compelling should they successfully acquire from the Assets Management Corporation of Nigeria (AMCON), Enterprise Bank Limited and Mainstreet Bank Limited respectively.
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