Business
Recapitalization: UBA seeks Shareholders’ Approval to Issue 10.8 Billion Shares
Recapitalization: UBA seeks Shareholders’ Approval to Issue 10.8 Billion Shares
The United Bank for Africa (UBA) has announced its intention to raise its share capital from N17.099 billion to N22.5 billion by issuing 10.8 billion new ordinary shares during the bank’s annual general meeting. This move is aimed at improving the bank’s capital base in line with regulatory requirements. The bank currently has a combined share capital and share premium of N115.8 billion, which is N384.2 billion off its required capital base of N500 billion.
According to a notice signed by Bill A. Odum, Group’s Company Secretary, the bank is seeking to raise the number of its issued shares from 34.199 billion to 45.999 billion ordinary shares valued at N0.50 each. The notice also stated that the Board of Directors of the Company will seek shareholders’ approval to raise additional capital through the issuance of securities comprising ordinary shares, preference shares, convertible and/or non-convertible notes, bonds, or any other instruments, in the Nigerian and/or International Capital Markets.
The pricing for the newly issued shares in the market remains undisclosed. However, in a speculative scenario where these shares trade within the range of N20 to N25 per share, it is projected that UBA stands to raise an estimated sum between N216 billion and N270 billion. The bank will try to raise capital by other means apart from a rights issue.
As of April 15, UBA was trading at a share price of N25.00, marking a 2.35% decline year-to-date. This reflects the bearish sentiment pervading banking stocks since the announcement of the recapitalization exercise.
The notice also stated that the Board of Directors of the Company will be authorized to take the necessary steps, if deemed appropriate, to cancel any unallotted shares of the Company or to further increase the share capital of the Company to an amount sufficient to accommodate any transaction undertaken by the Company to raise additional equity capital.
This move by UBA is in line with the Central Bank of Nigeria’s (CBN) directive to banks to recapitalize in order to meet the minimum capital adequacy ratio of 15%. The CBN has set a deadline of December 31, 2021, for banks to comply with this directive.
Recapitalization is an important tool for banks to maintain their financial stability and competitiveness in the market. It enables banks to meet regulatory requirements, improve their risk management, and support their growth plans. By raising additional capital, UBA will be better positioned to take advantage of emerging opportunities in the market and expand its operations.
In conclusion, the move by UBA to seek shareholders’ approval to issue 10.8 billion new ordinary shares is a positive step towards improving the bank’s capital base and meeting regulatory requirements. With the authorization to raise additional capital through the issuance of securities, the bank is well-positioned to take advantage of emerging opportunities in the market and support its growth plans. Shareholders should carefully consider the implications of this move and make informed decisions during the annual general meeting.
