LAGOS AUGUST 3, 2016 – Nigerian mid-tier bank FCMB plans to raise 10 to 15 billion naira ($47 million) of Tier II capital to boost its balance sheet and will target its retail investors for the offering, its chief executive officer said on Wednesday.Ladi Balogun said its capital adequacy ratio was close to the regulatory limit of 15 percent of assets at mid-year, and that it was undertaking the capital raising to provide an additional cushion.
He said the bank was also slowing down loan growth, adding that a rate of increase of 14.8 percent in the first half was largely due to the 40 percent drop in the value of the naira against the dollar since the dollar exchange rate peg was removed in June. Otherwise loans declined by 1.9 percent, said Balogun, whose term as CEO ends next year.
“For the Tier II we would be looking at anywhere in the range of 10 to 15 billion naira. Its really going to be targeted at retail because we feel that the rates from institutions will be high,” he told an analysts’ conference call.
“We have interest from some depositors who want higher yields.”
Balogun said the bank would also retain profits in addition to the bond sale to boost capital and tap into buffers at its holding company, if necessary. FCMB, which closed 19 branches in the first half to cut costs, had $225 million in retained earnings, he said.
FCMB’s shares were down 3.01 percent on Wednesday at 1.29 naira, having fallen fallen 21 percent this year and 32 percent last year.
The central bank shored up mid-tier lender Skye Bank this month with a loan and replaced its management after its capital fell below levels required by regulators and it has been urging people not to panic about the banking system.
But pressure is building, with loan books – nearly half of them in dollars – hammered by a shrinking economy, a plunging currency and acute foreign exchange shortages in Africa’s biggest oil producing nation following the slump in oil prices.
The central bank has told lenders to set aside extra provisions against their dollar loans in the wake of the sharp fall in the naira since it floated the exchange rate in June.
Balogun said its dollar loans were fully covered as of the end of June and that the bank expects to restructure 25 percent of loans to the oil and gas sector in the third quarter after it restructured 50 percent of those loans last year.
FCMB last week reported a 70.3 percent rise in its half-year pretax profit to 16.29 billion naira partly due to currency revaluation gains. Balogun said he expected a weaker result in the second half as it increases non-performing loan charges.
