Zenith Bank Plc has declared a Hybrid Rights Issue and subscription offer with the objective of raising approximately N290 billion.


Zenith Bank Plc, a leading financial institution in Nigeria, has announced its intention to raise N290 billion through a hybrid rights issue. This strategic move aims to further strengthen the bank’s capital base and position it for sustained growth and expansion.

This initiative is crucial as it represents a significant advancement towards fulfilling the Central Bank of Nigeria's (CBN) newly established minimum capital requirement of N500 billion.

Currently, Zenith Bank's issued and fully paid share capital stands at N15.698 billion, complemented by a share premium of N255.047 billion, indicating a need for an additional N229.225 billion to comply with the new mandate.

As a prominent player in the financial services sector, Zenith Bank has consistently demonstrated robust performance. Nevertheless, the recent capital requirement imposed by the CBN has necessitated this considerable capital increase.

Beyond merely satisfying the CBN's capital stipulations, the offer prospectus reveals that the proceeds from this initiative will also facilitate further investments in the bank's information technology infrastructure and provide essential working capital to bolster its growing operations.

The Initial Public Offering (IPO) comprises 5.2 billion ordinary shares priced at N36.50 each, accessible to the public, with applications required for a minimum of 250 ordinary shares and in increments of 250 shares thereafter.

The Rights Issue offers 5.2 billion ordinary shares at N36 per share specifically for existing shareholders. This offer commenced on August 1, 2024, and is anticipated to conclude on September 9, 2024.

Investors and current shareholders must carefully evaluate whether these offers represent a sound investment opportunity, taking into account Zenith Bank's market performance.

In 2023, the share price experienced a year-to-date (YTD) increase of 61%. However, in the current year, there has been a decline of 6.86% in the share price. This decrease may raise concerns among current shareholders.

Nonetheless, this reduction could provide an opportunity to purchase additional shares at a more advantageous price, particularly with the rights issue set at N36.00, which is below the 52-week peak of N47.19.

Over a longer horizon, the share price has appreciated by approximately 57% over the past five years, positioning the bank as the second most capitalized institution on the NGX, with a market capitalization of N1.130 trillion.

In addition to evaluating the Bank’s share price trajectory, it is essential to consider its market standing, financial performance, and the implications of the additional capital on its financial stability and prospects for future growth.

Zenith Bank stands as one of Africa's premier financial institutions. The Bank has expanded its shareholders’ equity from N20 million in 1990 to N2.32 trillion as of December 2023.

As per the Africa Report New TAR Index, the Bank is currently ranked second in Africa, based on five criteria: profitability, liquidity, solvency, asset quality, and size.

In 2023, Zenith Bank emerged as the most profitable listed bank on the NGX, reporting a pre-tax profit of N795.962 billion.

Although the bank has yet to disclose its Q2 2024 results, the first quarter figures suggest that it has already attained approximately 40% of its pre-tax profit for 2023.

The achievement of around 40% of its 2023 pre-tax profit in the first quarter of 2024 reflects robust financial performance and positive momentum.

In addition to the influence of foreign exchange gains on its financial results, Zenith Bank has shown strong performance in its core business operations.

The bank reported the highest net interest income of N736.182 billion in 2023, propelled by significant interest income of N1.14 trillion, with loans and advances accounting for approximately 59%. The bank has increased its loans and advances by 63%, reaching N6.6 trillion.

The bank seems to sustain its loans and advances profile through the proceeds generated from its recent offerings.

As outlined in the offer prospectus, the bank intends to allocate approximately 37% (N36.74 billion) of the IPO proceeds towards loans for the corporate, SME, and retail sectors. While this allocation has the potential to enhance earnings, it may also elevate the bank's risk profile.

In 2023, the bank experienced a significant increase in its cost of risk, rising by 128% to 7.3%, as loan impairments surged to N401 billion, marking one of the highest figures among banks for that year.

In this regard, it is essential to maintain a well-diversified loan portfolio across various sectors to support asset quality. Although the bank perceives its loan portfolio as well-diversified, 24% remains exposed to the oil and gas sector.

Consequently, it may be wise for the bank to further diversify its loan portfolio to reduce the risks associated with dependence on any single sector. This approach will enhance asset quality and establish a more stable foundation for future growth.

The bank is also positioned for expansion into additional markets with the proceeds from the offering. It plans to allocate 35% (N34.7 billion) of the net IPO proceeds of N99.3 billion for this purpose.

This strategy appears promising, particularly given the contributions of its offshore subsidiaries to the group's profits in 2023. By the end of the 2023 financial year, Zenith Bank had established a presence in the UK and three other African nations: Ghana, Gambia, and Sierra Leone.

These offshore branches accounted for 13% of gross revenue and 16% of the group's profit before tax. Furthermore, expanding into new markets could potentially yield improved results if the bank successfully identifies and capitalizes on high-growth opportunities.