Wema Bank, Polaris Bank, and Keystone Bank are conducting preliminary assessments of potential merger and acquisition opportunities in response to the ongoing banking sector recapitalization. Following the Central Bank of Nigeria's (CBN) March 2024 recapitalization guidelines, numerous banks have sought capital market funding to ensure continued operational compliance..

This recapitalisation initiative aims to fortify the banking sector and enhance the resilience of Nigerian banks amid economic challenges.

The NGX Invest platform was established to facilitate public offerings and rights issues, enabling banks to connect with a broader range of investors.

Since the announcement of the banking recapitalisation exercise in March 2024, several banks have engaged with the equities market to raise capital. Five banks have successfully completed their capital raises, while one is still in progress.

The banks that have raised capital include GTCO (N400.5 billion), Access Holdings (N350.1 billion), Zenith Bank (N289.1 billion), Fidelity Bank (N127.1 billion), and FCMB Group (N110.9 billion).

Additionally, Sterling Financial Holdings Company is seeking N153 billion after completing a $50 million capital raise through private placement. Among the banks that have collectively raised the targeted N1.277 trillion, some have experienced over-subscriptions.

Analysts note that investors have been exercising caution in trading banking stocks due to the CBN's recapitalisation policy.

Since the CBN's announcement of the banking sector recapitalisation exercise on March 28, 2024, investors in banking stocks have continued to trade with caution.

In this new regulatory environment, commercial banks are required to meet minimum capital thresholds of N500 billion for international authorisation and N200 billion for national authorisation. Meanwhile, banks with regional authorisation must achieve a capital floor of N50 billion.

Non-interest banks with national and regional authorisations will also need to increase their capital to N20 billion and N10 billion, respectively.

Numerous banks in Nigeria are currently in the process of raising capital on the Nigerian Exchange (NGX).

Among these institutions, Zenith Bank has successfully raised N289.38 billion through a combination of a public offer and a rights issue. Fidelity Bank has also raised N127.10 billion via similar methods, while FCMB Group secured N110.94 billion.

Sterling Financial Holdings Company Plc raised N130.79 billion through private placements and a rights issue. Additionally, UBA and Stanbic IBTC Holdings have both raised capital through rights issues.

FBN Holdings is in the midst of a rights issue to raise capital, while Guaranty Trust Holding Company (GTCO) is targeting N400 billion ($253 million). Access Holdings Plc has raised N351 billion ($222 million).

In accordance with the CBN guidelines regarding the recapitalization process, banks that are unable to meet their capital requirements have the option to consider mergers and acquisitions.

Tunde Mabawonku, an Executive Director at Wema Bank, discussed the bank's recapitalization strategy, stating that they aim to increase their capital from the current N68 billion to N200 billion by September 2024.

Wema Bank plans to raise N150 billion in new capital through a mix of rights issuance, public offerings, and private placements, with the goal of completing this by the end of the first quarter of 2025.

While the bank intends to begin its capital-raising efforts by the end of 2024, there are also discussions about a potential merger with another bank that shares Wema Bank's philosophy.

Mabawonku emphasized that any merger discussions are still in the early stages.

“M&A conversations might seem a bit premature at this level. Our focus is on capitalising in line with regulatory requirements and continuing to do business,” he said.

Regarding Polaris Bank, a reliable internal source has informed Daily Independent that the bank is exploring a merger, facilitated by the Central Bank of Nigeria (CBN) following the recent board restructuring. This source further indicated that a capital increase of approximately N150 billion is under consideration, a feasible goal.

“But there are moves in the bank to be a regional bank because our current capital and share pre­mium is about N50 billion. The management is also looking for merger but they have not recorded favourable plans that will keep the name of the bank”.

Similar to Polaris Bank, Keystone Bank recently experienced a change in its board and management, mandated by the central bank.

A confidential source within the bank indicated that its primary concern is an uncompetitive operating environment, despite its proximity to the required N200 billion capital for national licensing.

Concerns exist regarding the bank's ability to maintain competitiveness and navigate the challenges of the projected $1 trillion economy under President Bola Tinubu's administration, even with national bank status.

The source stated that a merger is necessary for the bank to strengthen its position within the banking industry.

CBN Imposes Sanctions on Nine Banks for ATM Cash Dispensing Failures

In a clear demonstration of its commitment to regulatory compliance, the Central Bank of Nigeria (CBN) has imposed sanctions on nine Deposit Money Banks (DMBs) for their failure to provide naira notes through automated teller machines (ATMs) during the holiday season. 

Each bank has been fined N150 million for not adhering to the CBN’s cash distribution guidelines, following inspections conducted at their branches. 

This enforcement action comes after the CBN issued multiple warnings to financial institutions to ensure the availability of cash, especially during peak demand periods. 

The banks have been informed that the fines will be deducted directly from their accounts held with the central bank. 

Mrs. Hakama Sidi Ali, the Acting Director of Corporate Communications at the CBN, confirmed the sanctions, emphasizing that “Ensuring a smooth cash flow is essential for maintaining public confidence and economic stability.” 

She further stated that the CBN will not hesitate to impose additional penalties on any institution that continues to violate its cash circulation regulations. 

The CBN's ongoing investigations will focus on preventing cash hoarding and rationing, both at bank branches and among Point-of-Sale (POS) operators. 

Additionally, the Central Bank is collaborating with security agencies to address illegal cash sales and operational breaches, including enforcing the daily withdrawal limit of N1.2 million for POS operators. 

During the Annual Bankers’ Dinner of the Chartered Institute of Bankers of Nigeria (CIBN) in November 2024, Governor Olayemi Cardoso cautioned banks to strictly follow cash distribution policies or face significant repercussions. 

He reaffirmed the CBN’s dedication to maintaining a strong cash reserve to meet the needs of Nigerians, stating, “Our focus remains on building trust, ensuring stability, and facilitating seamless cash circulation throughout the financial system.”

The Central Bank of Nigeria (CBN) directed all financial institutions to adhere to its regulatory guidelines, emphasizing that non-compliance will result in immediate and stringent penalties.