Leading financial institution in Nigeria, FBN Holdings Plc, FBNH, has concluded plans to announce the launch of a rights issue offering of 5,982,548,799 ordinary shares at N25.00 per share.

The initiative, which aims to raise a total of N149.56 billion, reflects the bank’s strategic response to regulatory requirements while bolstering its financial health and positioning it for sustained growth in an increasingly competitive banking landscape.

The rights issue offers existing shareholders the entitlement to one new share for every six shares held as of October 18, 2024. The initiative has already gained traction in the market, with FBNH’s share price closing at N26.80 on November 4, 2024—7.6 per cent above the issue price—and rising further to 9.6 per cent above the issue price by November 18.

FBN Holdings has outlined a clear strategy for deploying the proceeds of the rights issue to address critical areas of its operations. A significant portion, amounting to N103.12 billion (68.95 per cent), will be allocated to improving the Capital Adequacy Ratio (CAR) of First Bank of Nigeria Limited, its flagship subsidiary. This includes N77.34 billion earmarked for corporate lending and N25.78 billion for the retail segment. By bolstering its CAR, which stood at 17.75% as of the first half of 2024, FBN Holdings aims to create a buffer against financial shocks and comply with the Central Bank of Nigeria’s (CBN) regulatory requirements.

This move is especially critical given Nigeria’s high-risk environment characterized by currency fluctuations and inflationary pressures.

Another key focus of the rights issue is expanding the bank’s lending activities. Over the past years, FBN Holdings has demonstrated remarkable growth in this area, with loans and advances rising by 72% year-on-year to N8.61 trillion in 2023 and further reaching N12.73 trillion by September 2024.

This expanded lending capacity has significantly contributed to a 165 per cent surge in interest income during the first nine months of 2024, totaling N1.633 trillion, with 67% of this derived from loans and advances. However, this growth comes with heightened credit risk, as reflected in the bank’s cost of risk, which rose by 35% to 2.70 per cent in the same period. While the increased lending capacity is expected to drive profitability, effective management of credit exposure will be critical to safeguarding shareholder value.

To diversify its revenue base and reduce reliance on the Nigerian economy—susceptible to currency and commodity price fluctuations—FBN Holdings has allocated N29.46 billion (19.7 per cent) of the proceeds to expanding its international operations. By leveraging its global presence, the bank aims to mitigate domestic risks and create stable income streams, enhancing its resilience in the face of economic volatility.