FBN Holdings Plc (FBNH), one of Nigeria’s leading financial institutions, has launched a rights issue offering 5,982,548,799 ordinary shares at N25.00 per share, aiming to raise N149.56 billion. This move is part of the company’s strategy to comply with the Central Bank of Nigeria’s (CBN) capital requirements while enhancing liquidity and financial stability.
The funds raised will also position First Bank of Nigeria Limited, FBNH’s flagship subsidiary, for sustained growth and strengthen its competitive position in Nigeria’s banking sector. Shareholders will have the opportunity to purchase new shares on a one-for-six basis, with the qualifying date set as October 18, 2024.
The rights issue has already been well-received in the market, with FBNH’s share price increasing by 7.6% on the opening day and further climbing to 9.6% above the issue price by November 18, 2024.
A significant portion of the proceeds—N103.12 billion (68.95%)—will be directed toward enhancing the Capital Adequacy Ratio (CAR) of First Bank. This is crucial for ensuring compliance with regulatory standards and fortifying the bank’s resilience against economic shocks.
The remaining funds will be used to expand lending activities and boost profitability. As part of its strategy to mitigate risks and diversify revenue streams, FBNH also plans to allocate N29.46 billion (19.7% of the proceeds) toward expanding its international presence.
The rights issue presents a compelling opportunity for shareholders to acquire discounted shares at N25, below the year’s average share price of N25.75. While the issuance of new shares will increase the bank’s equity base and may impact the stock price in the short term, analysts remain optimistic that the strategic use of proceeds will drive long-term growth and enhance FBNH’s market position.
As of September 2024, FBNH reported a strong performance with a 126% year-on-year increase in profit after tax (PAT), reaching N533.88 billion. However, the bank faces heightened credit risk, with the cost of risk rising by 35% to 2.70% in the first nine months of 2024.
Despite the potential dilution impact, the rights issue positions FBN Holdings for sustained profitability and market leadership, offering shareholders an opportunity to benefit from future growth.
