By Omoh Gabriel, Business Editor
Nigeria banks are today a surprise to many industry watchers. Every one of the existing twenty five banks is not ready to play the second fiddle. They all want to be big strong and reliable as the stallion. While about a year ago it was all about meeting the regulatory authorities minimum capital base of twenty five billion naira, today the story is driving up the shareholders fund to a minimum of N100billion. The desire of Nigeria banks to raise their capital to the high levels in the eyes of many looks questionable. Some top bankers believe that given the volume of business that Nigeria banks finance, banks are already over capitalise. But others feel they are not.
Managing Director/Chief Executive officer of Oceanic Bank Dr. Mrs Cecilia Ibru said that one of the reasons Nigerian Banks are going back to the capital market for more funds is to enable them finance big projects which hitherto they were unable to finance and foreign banks took undue advantage of such opportunities in the country.
Dr. Cecilia Ibru said that Oceanic Bank was going to the market to expand its shareholders funds that will give the bank the opportunity to lend much more to single but large projects which lower level of shareholders fund would not allow . She disclosed that when she saw the plan for the fourth mainland bridge and the attendant advantage to the economy it ‚Äúblew my mind and we are preparing to be part of the development of the fourth mainland bridge‚Äù.
She said with adequate funding Nigerian Banks are prepared to lend long term for the development of the country and in particular they are gearing up to participate in the oil and gas sector of the economy. She further said that the banks are also preparing to fund the development of the Nigeria railways and the power sector. Banks she said are now in the mood to tap into the huge opportunities that are available in these sectors hence the desire of banks to raise more funds to position them to perform their intermediation role in the development of the economy.
Dr. Ibru stated that foreigners are looking at Nigeria and that Nigerians must take the bull by the horns to develop the country.
She also said that banks after the second round of consolidation will be in position to fund road projects and other infrastructure in the country. She dispel the feelings in some quarters that Nigerian Banks are over capitalise saying that shareholders fund enable banks to expand and that there is much fund in the Northern part of the country to mobilise.
The only way to bring these funds to the formal sector is to take banking to the people by making banking services available to the populace.
In recent time Nigeria banks have been financing big projects. Last week Zenith led five others to provide refinancing to the tune of N20billion for the completion of terminal 2 of Murtala Mohammed Airport. Before now Oceanic had led other banks in the syndicating $222million to finance the purchase and rehabilitation of old National fertiliser Company NAFCON, now Notore.
The same Oceanic had packaged the financing of OANDO.
At the early stage of bank consolidation two of Nigeria‚Äôs big banks, The United Bank for Africa, UBA, an old generation bank and Standard Trust Bank, STB, one of the fastest growing new generation bank from the ashes of Crystal Bank agreed to team up. It was then big news as their combine shareholders fund was about N48billion. The new UBA is again in the market to raise N54billion to up its shareholders fund to N130billion. Indications are that UBA is plotting to buy off Unity bank one bank in which Northern shareholders hold sway. Just as it was in the case of UBA/STB can anything stand in the way of their success? And what lies in store for the competition if UBA succeeds in acquiring Unity Bank? The rumour of the decision of the two banks to merge has sent shock waves down the industry and has sent a good number of banks which thought they have arrived at the new minimum capital requirement to the drawing board. It has off set earlier prediction of which banks are likely to retain their identity.
The UBA/Unity Bank proposed merger has fueled speculations that the CBN initial plan for only 12 banks in the country may be the case after all. With the large number of branches in the coffer of Unity bank, combining it with that of UBA will be formidable. UBA directors and officers have a lot of lessons to learn from the old STB as more of their staff and directors are now in the cold. Even the chairman of UBA was not speared as immediately after the last AGM his retirement was announced which is still drawing suppressed anger from shareholders.
While some banks are looking at the domestic market for fresh funds others are looking out to the international finance arena.
FCMB has already attracted a club of leading international institutional investors led by Helios Investment Partners last to cross a block trade in the shares of First City Monument Bank Plc (FCMB) by acquiring 1,5billion shares, representing 15.81 per cent of the bank’s shareholdings.
The deal which is a return of confidence in the Nigeria economy and financial sector by foreign institutional investor was highly welcome by operators in the capital market. Operators long view of the return of institutional investors and foreign banks into the Nigeria financial service sector is that of ground breaking for the CBN vision 2020 of Nigeria becoming the financial hub of Africa. The Nigerian Stock Exchange in conveying its approval for these investments stated in a letter signed by Binos D. Yaroe, General Manager and Head of Quotations/Listing Department that “The Director-General/CEO and the entire management team of The Exchange congratulate FCMB for successfully attracting internationally renowned institutional investors into making significant equity investments in the bank and looks forward to a speedy closeout of the transaction”.
Helios Investment Partners is a UK based equity fund with about $300 million under its management and access to an even larger co-investment pool from its limited partners. The fund’s investments in FCMB include contributions from other prominent investors such as CDC, an investment arm of the British Government; and several of the world’s leading investment funds, based in the United States believed to be Soros Private Equity Funds (Soros is one of the largest and foremost fund managers in the world) as well as the Overseas Private Investment Corporation (OPIC), an agency of the United States Government.
In addition to the capital provided by the Helios funds, a group of US funds (several top-tier hedge funds), that are limited partners in the Helios fund, also made additional direct investments into FCMB through a co-investment vehicle. All investors are taking a long term position and have committed to selling restrictions for several years and will consequently be represented on the Board of FCMB.
This remarkable flow of funds into FCMB by these reputable professional investors is clear demonstration by the global investment community of a high level of confidence in FCMB’s unfolding growth story and strategy. This would be the first investment for most of these funds in the Nigerian equity markets. It is also a resounding endorsement of the Professor Chukwuma Soludo led banking reforms initiative and an endorsement of the Nigerian economic success story.
With these developments FCMB is further strengthened to expand and deepen its role and offering in the African continent, providing the bank with a formidable group of financial partners for it’s future growth initiative. Corporate governance and shareholding structure will be greatly enhanced and this transaction may indeed lead to surplus demand for FCMB shares.
It is expected that the bank will build its relationship with this exceptional group of investors to channel further portfolio investments into the Nigerian economy. FCMB is also expecting to make some further investment announcements before the end of its financial year in April 2007.
With this investment the bank shareholders funds is now in the region of N40billion, placing the bank in a competitive advantage.
First Bank one of the oldest in the industry recently in far away London floated a $1.7billion bonds. This aside, the bank has held an extra ordinary general meeting of its shareholders to fast track its plan to raise N100billion from the local market. Any time soon the bank‚Äôs public offering will be in the market place. First Bank management had plan to be part of history in setting up a pan Africa. The Bank had planned to merge with Eco Trans National the holding company of Ecobank. The plan was to set up a pan Africa Bank. The plan has hit the rock has the bank discovered that Eco Trans national is far bigger than it thought. It is more than Ecobank Nigeria. With the failure to realise this dream, First Bank is coming into the capital market to raise N100billion.
As things stand now the question is no longer N25billion non of the existing bank want to stop at N25billion. It is either N100billion or more. Banks are frantically looking for marriageable partners. Access Bank had made a bold move to buy over NSITF holdings in Afribank. The deal would have given the bank the controlling shares. But Afribank shareholders, management and staff frustrated the deal. The shares which were already paid for were repurchased by Afribank after a deal brokered by Thisday Publisher Nduka Ogbeibena. At the meeting it was agreed that Access bank should sell back the shares at a premium to Afribank.
In a similar attempt, Access had moved to purchase bulk shares in Union Bank but the deal backfired as the then Managing director of Union Bank Godwine Oboh had directed Union Homes to buy off any where any place Access Bank shares could be found but for the intervention of the CBN, one would have given way for the other.
Beaten in the two attempt Access Bank is preparing to hit the market to raise fresh funds. Afribank offer will soon hit the market too
Zenith PLC, Intercontinental have already successfully raised fresh funds. While Zenith Shareholders funds is in the region of N110billion, Intercontinental is about that too as the result of its offer is yet to be made public insiders say the bank raised close to N98billion from the offer. The bank is calling for an extra ordinary general meeting of the shareholders to seek approval for increase in its authorised capital in order to absolved the excess funds that its present capital would not accommodate. This is the advantage it has over the earlier banks which raised more that their authorised capital could take and were made to return the excess funds. Guarantee Trust Bank, First Bank and Union Bank which many thought were satisfied with the level of their shareholders fund have suddenly been taken unawares by the smart game those the older bankers described as cow boy bankers have brought into the consolidation equation.
As consolidation in Nigeria and around the world gathers pace, pressure is sure to grow. Banks are now betting that only the vastest companies will take full advantage of the opportunities offered by globalisation and the rise of big new financial markets in oil and gas, maritime. In concrete terms, Nigeria banks reckons that the merged group can cut its combined headcount by about five per cent of the total. There is a danger that the larger a firm gets, the more unwieldy and harder to manage it becomes. The question being asked is there executive capacity within the country to manage bigger banks? What ever the case may be from available data and information from bank chiefs as at today, no one bank is satisfied with its current position.