Stanbic IBTC’s Ambitious Capital Raising Plans: A Strategic Move for Growth

Stanbic IBTC’s Ambitious Capital Raising Plans: A Strategic Move for Growth

Stanbic IBTC Holdings Plc has recently made significant strides in its financial strategy by announcing plans to raise a substantial sum of N550 billion. This capital will be sourced through a combination of a rights issue programme, aiming to generate N150 billion, and a debt issuance programme targeting N400 billion. These resolutions were reached during the group’s Annual General Meeting held on May 16, 2024, in Lagos, Nigeria.

A key resolution from the AGM involved the decision to augment the group’s share capital from the existing N6.478 billion to N8.25 billion by creating an additional 3,543,002,837 ordinary shares. As of now, Stanbic IBTC Holdings boasts 12,956,997,163 fully issued ordinary shares.

It’s important to note that Stanbic IBTC Holdings is a conglomerate comprising 10 direct subsidiaries, including Stanbic IBTC Bank Limited, Stanbic IBTC Pension Managers Limited, and Stanbic IBTC Asset Management Limited, among others. The group’s paid-up share capital currently stands at N109.26 billion, falling short of the N200 billion minimum capital requirement stipulated by the CBN for a national banking license.

The group’s paid-up share capital is distributed across its direct and indirect subsidiaries, with approximately N62.469 billion allocated to Stanbic IBTC Bank Limited, a wholly-owned entity. Notably, Stanbic IBTC Bank’s paid-up capital is divided into a N20 billion share capital and N42.469 billion share premium.

Given the shortfall in paid-up capital, particularly in Stanbic IBTC Bank Limited, the group has set its sights on raising N150 billion through a rights issue programme. This initiative involves the issuance of an additional 3,543,002,837 ordinary shares, with the aim of garnering the targeted sum. The new shares are expected to be offered at a price level of approximately N42, presenting an opportunity for existing shareholders to acquire additional shares at a discounted rate. However, it’s crucial to acknowledge that such an issuance may have a dilutive effect on the shares of existing shareholders.

The announcement of the banking recapitalization exercise has led to a 7.14% decline in Stanbic IBTC’s share price from N56.00 on March 28 to N52 as of May 17. With the impending rights issue, there is a projection of further decline in the share price. Matilda Adefalujo, an Investment Research Analyst at Meristem Securities, highlighted that investors often exhibit initial pessimism during rights issues due to concerns about the dilutive impact on their shares. However, she emphasized that despite these initial reactions, Stanbic IBTC has demonstrated strong profitability in its Q1 2024 and FY 2023 performance, suggesting potential for positive returns for investors.

Adefalujo also stressed the importance for Stanbic IBTC to optimize its loans and advances while reinforcing its core operations to reassure investors of its ability to deliver favorable returns. Additionally, the feasibility of raising the specified amount from the NGX (Nigerian Exchange Group) amidst the anticipated volume of rights issues over the next two years is a factor that warrants consideration. Notably, the announcement of the banking recapitalization exercise has seen over N1 trillion worth of upcoming banking rights issues being unveiled. For instance, Nigerian Breweries is also planning to raise N600 billion through a rights issue on the exchange.

In addition to the rights issue programme, Stanbic IBTC is embarking on a N400 billion debt issuance programme to bolster its paid-up capital. The specifics of the bond issuance format have yet to be disclosed, but the group’s board has obtained shareholder approval to determine the borrowing method and currency. This debt issuance program could take the form of a public offering (selling bonds to the public), private placement (selling bonds to specific investors), or other mechanisms.

In conclusion, Stanbic IBTC’s strategic move to raise N550 billion through a rights issue and debt placement signifies a bold step towards fortifying its financial position and expanding its operations. While the market may initially respond with caution, the group’s strong fundamentals and potential for growth provide a solid foundation for these capital-raising endeavors. As the financial landscape continues to evolve, Stanbic IBTC’s proactive approach positions it well to navigate the challenges and capitalize on opportunities for sustained success.

The information provided in this blog post is based on the latest available data as of the time of writing and is subject to change as new developments arise.