The substantial capital raise is a pivotal step in supporting Abbey Mortgage Bank's transition from its current status as a primary mortgage bank to a regional commercial bank. This aligns directly with the CBN's recently updated minimum capital requirement of N50 billion for regional authorization holders. The bank had already secured shareholders' approval for this conversion plan in January, setting the stage for this latest financial endeavor.
Abbey Mortgage Bank's Funding Strategy Detailed
Following its 33rd Annual General Meeting (AGM) held on Wednesday, the bank released a statement, signed by Company Secretary, Geoff Amaghereonu, outlining the approved funding strategy. This comprehensive approach includes the issuance of shares through both rights issues and public offers. Furthermore, the bank intends to leverage other financial instruments such as global depository receipts, commercial papers, loans, convertible and non-convertible securities, medium-term notes, and bonds.
The flexibility embedded in the plan allows for the funds to be raised in various tranches, series, or proportions. The specific terms and interest rates for these instruments will be determined by the Board, subject to the necessary regulatory approvals.
As part of this extensive capital raise, the Board has been granted authorization to execute all relevant agreements, documents, and undertake any steps required to ensure a smooth transition. This includes the appointment of professional advisers, securing all regulatory clearances, allotting shares, and facilitating their listing on the Nigerian Exchange Group Limited.
Optimizing Capital Acquisition and Industry Impact
Abbey Mortgage Bank is committed to leveraging advanced financial processes, including book-building, to optimize its capital acquisition efforts while ensuring full compliance with all directives issued by financial regulatory authorities. This decision underscores the institution’s firm commitment to bolstering its financial foundation and broadening its service offerings as it progresses towards becoming a full-fledged regional commercial bank.
Industry experts have highlighted the broader implications of this shift from mortgage banking to regional commercial banking. They anticipate that such a transition will significantly enhance financial inclusion and provide wider access to a more comprehensive suite of banking services, particularly in areas that are currently underserved. This strategic pivot is also expected to strengthen Abbey Mortgage Bank's competitive position within Nigeria’s dynamic and evolving financial sector.
It is noteworthy that the CBN, in March 2024, significantly increased the minimum capital base requirements across various banking categories. Commercial banks with international authorization are now mandated to hold N500 billion, while those with national authorization require N200 billion. As mentioned, regional authorization holders, which Abbey Mortgage Bank aims to become, must maintain N50 billion.
Merchant banks are also required to have N50 billion, and non-interest banks with national and regional authorization must possess N20 billion and N10 billion, respectively. Abbey Mortgage Bank's proactive capital raise demonstrates its commitment to not only meeting but potentially exceeding these new regulatory benchmarks, positioning itself for robust growth and expanded service delivery.