Banking
More Banks to Raise Capital in 2017
By Obinna Chima
The macro-economic challenges in the country as well as the level of depreciation suffered by the nation’s currency, will compel more commercial banks to seek for avenues to beef their capital this year, a Lagos-based investment and research firm, CSL Stockbrokers Limited stated in a report titled: “Capital Adequacy: Pulse Check.”
The move, the firm added, is expected to enable the financial institutions withstand any shock in the industry as well as to remain above the regulatory threshold.
Capital adequacy is a persistent issue for a number of Nigerian banks. Regulatory capital ratios have been impacted by the large depreciation of the naira given the extent of dollar lending in the sector. They have also been hit by the sharp rise in impairments (implying little or no retained earnings).
The Central Bank of Nigeria (CBN) requires that banks with international subsidiaries maintain a capital adequacy ratio (CAR) of 15 per cent while banks without international subsidiaries maintain a CAR of 10 per cent. The minimum requirement for systemically important banks (effective July this year) is 16 per cent.
First City Monument Bank Limited (FCMB) last week sold N5.1 billion bonds, less than it originally planned to raise, at an interest rate coupon of 17.25 percent, its advisers said on Friday. The seven-year bond was issued by way of a book-building with Standard Chartered Bank, local investment bank Chapel Hill Denham and FCMB Capital Markets as book runners. The offer was fully subscribed.
But before the recent Access Bank’s offer, the last Eurobond issued out of Nigeria was in October 2014 by Seven Energy Finance Limited.
Sourcing naira bonds has also become a tough call given high interest rates on treasury bills and FGN bonds.
Wema Bank had embarked on an issue of N20 billion in local currency bonds after scrapping plans in 2015 to issue a $100 million 7-year dollar bond because of currency risks. Sterling Bank also tried to raise a N35 billion local currency-denominated bond last year.
However, a look at banks’ nine months 2016 capital adequacy ratios (CAR), according to the report suggested that the industry may begin to see a flurry of capital raising activities if macro-economic conditions fail to improve.
Nonetheless, the report indicated that the smaller banks may have more difficulty in finding willing investors in their foreign bond market and the domestic market. The bigger banks however appeared to have performed better last year as Guaranty Trust Bank successfully redeemed its $500 million Eurobond early 2016. Access Bank also successfully refinanced its existing senior unsecured $350 million 7.25% notes due July 2017 last year.
Despite challenges in the raising naira bonds, the expectation is that local currency bonds would remain the favoured option, especially for the mid-cap lenders.
According the report, the options available to the banks are limited in the current macro environment.
“Rights issues would be very dilutive given low share prices while raising tier-2 capital, by issuing long-term dollar subordinated debt, is difficult in as US dollar rates can be so high as to make the exercise unprofitable in terms of spreads on US assets.
“Sourcing naira bonds has also become a tough call given high interest rates on treasury bills and FGN bonds. Despite challenges in raising naira bonds, we believe that local currency bonds still remain the favoured option, especially for the mid-cap lenders, ” it added.
The CBN had tried various means in the past months to reduce the widening gap between interbank and parallel market rates. Despite these measures however, the naira has continued on a depreciatory path in the parallel market, and fell to a historic low of N500 to the dollar last week.
Asset quality also remains a problem for the industry. If a bank suffers an unexpected rise in cost of risk (COR) that exceeds the capacity of one year’s profits to absorb it, then that bank will be looking at writing down capital.
“We examine the potential impact on capital of a sudden surge in CoR and a notional further 20 per cent naira devaluation on capital adequacy. A further 20 per cent devaluation will still leave the banks we cover in this report above regulatory limits, although Diamond just barely. “In our first scenario, which assumes 10 per cent of loans to stressed sectors go bad, Zenith, Guaranty Trust Bank, UBA, Access, and Fidelity remain at comfortable capital levels.
“An unexpected surge in CoR, assuming 20 per cent of these loans go bad, however will take all the banks, with the exception of Access, below regulatory limits,” it added.
ThisDay
By Adedapo Adesanya
The Central Bank of Nigeria has set a minimum trade value of $100,000 for interbank foreign exchange trading via the Electronic Foreign Exchange Matching System (EFEMS), which is set to go live on December 2.
This was contained in a new directive dated November 25, 2024, and signed by CBN’s Director of the Financial Markets Department, Mrs Omolara Duke.
The circular also noted that the development is part of efforts to ensure transparency, efficiency, and compliance within Nigeria’s FX market.
The EFEMS is designed to streamline interbank FX trading, reduce counterparty risks, and ensure adherence to CBN regulations.
The statement also said CBN has designated Bloomberg’s BMatch as the official order-matching platform for interbank transactions, with trading hours set between 9:00 am and 4:00 pm West Africa Time on business days.
The apex bank also said the $100,000 minimum tradable amount comes with incremental clip sizes of $50,000.
The EFEMS is also limited to spot FX transactions involving the Nigerian Naira and the United States Dollar. This means transactions occur “on the spot” or close to the trade date.
The CBN, however, retained the discretion to introduce other currency pairs when deemed necessary.
The guidelines document read, “All trades consummated on EFEMS are binding unless cancelled by mutual agreement of both parties with written approval from the CBN.
“The minimum tradable amount is US$100,000.00, with incremental clip sizes of US$50,000.00.
“Participants must set credit and settlement limits for other counterparties in the system. Transactions exceeding these limits will not be executed.
“Participants must have adequate credit and settlement limits set for the CBN as its counterparty bank.
“Participants are required to comply with the Nigerian Foreign Exchange Code and other CBN regulations.”
The apex bank noted that participation in the EFEMS is limited to authorised dealer banks while other institutions wishing to join the platform must first obtain prior approval.
These entities are also required to execute agreements with the CBN-approved platform provider, maintain accurate profiles, and operate within prescribed credit and settlement limits.
Withdrawal from the platform must be preceded by a 30-day notice, along with the resolution of any outstanding obligations.
Also, trades conducted via the platform will remain anonymous until matched. Counterparty details will only be revealed once transactions are concluded and are in line with settlement protocols.
Transactions exceeding set limits or conducted outside EFEMS parameters must be reported promptly and logged onto the FX blotter within 10 minutes.
The CBN emphasised that it will closely monitor all transactions on EFEMS to ensure market integrity and transparency.
Participants are also required to submit daily reports detailing trade volumes, settlement statuses, and counterparties.
The CBN discloses that it also reserves the right to publish aggregated or disaggregated trade data for market analysis, subject to confidentiality agreements.
Any violations of the EFEMS guidelines or related regulations will attract strict penalties, including the suspension or revocation of access rights.
The CBN further stated that it will periodically review the platform’s operations to ensure efficiency and compliance with its directives.
By Aduragbemi Omiyale
Access Bank Plc has assured customers that their funds are safe with the company, stressing that there’s nothing to worry about.
The lender gave this assurance in reaction to a video making the rounds on social media that about N500 million belonging to a customer was missing.
The financial institution described this allegation as “baseless,” denying any involvement in “any unethical behaviour.”
“Our attention has been drawn to a video on social media wherein allegations of missing funds and unethical behaviour have been made against Access Bank PLC.
“First and foremost, we wish to emphasise that the safety and security of our customers’ funds are core priorities which we take seriously. Second, Access Bank Plc does not engage in or condone any unethical behaviour.
“In the instant case, the allegations of missing funds in the Bank are most untrue and baseless.
“There is no N500 million or any other fund or amount missing from the subject customer’s account or any other customer’s account with us.
“We and other independent stakeholders in the banking industry have thoroughly investigated these allegations and independently arrived at the same conclusions.
“Access Bank PLC operates with the highest ethical standards, and we protect our customers’ interests whilst also respecting privacy laws.
“Consequently, whilst we have engaged and will continue to engage with our customers, we must advise the public not to rely on or believe sensational and unverified claims that are designed to titillate and mislead the public,” a statement from the firm stated.
By Modupe Gbadeyanka
The Ajose Adeogun Street in the Victoria Island area of Lagos State has been decorated by Zenith Bank Plc in line with its yearly tradition.
The area was lightened up by the financial institution ahead of the yuletide season and at the unveiling on Saturday, November 23, 2024, the lender said it was happy to do it again for the 18th year.
“Over the years, Zenith Bank has hosted this spectacular event, transforming the entire Ajose Adeogun Street into a breathtaking yuletide wonderland.
“Our beautiful and elaborate Christmas decorations have become a centre of attraction and shared on social media platforms globally.
“As we light up the street tonight, we celebrate the essence of Christmas and Zenith Bank’s unparalleled Corporate Social Responsibility (CSR).
“Our customers will always be at the centre of all that we do in Zenith Bank,” the chief executive of Zenith Bank, Ms Adaora Umeoji said.
She urged everyone to imbibe the message and spirit of Christmas which is about love, kindness, generosity and respect for humanity, and thanked the Lagos State Government for creating an enabling environment for the initiative.
She also praised the efforts of Quantum Markets, who have been responsible for the annual decorations, for their expertise and creativity in putting together the lovely decorations.
“I want to thank the management of Quantum Markets for all the beautiful, creative and innovative ideas they keep coming up with. Quantum Markets always make it bigger and better every year, and we are always looking forward to it,” she stated.
The beautiful Christmas decoration, which transforms the entire stretch of Ajose Adeogun Street (home to Zenith Bank’s corporate headquarters) and roundabout into a breathtaking yuletide wonderland, has come to be recognized as an iconic tourist attraction, bringing visitors from far and wide who visit with their families and friends to take pictures and enjoy the ambience of the street.
The company’s sustainability and CSR initiatives are hinged on the belief that today’s business performance is not all about the financial numbers – the bank believes that an institution’s social investments, contributions to inclusive economic growth and development as well as improvements in the condition of the physical environment, all constitute a balanced scorecard.
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