…Nova Merchant Bank Prepares for capital raise of N160Bn
by Niyi Jacobs
In a significant shift within Nigeria’s financial landscape, indications suggest that several current merchant banks are contemplating a transition to deposit-taking commercial banks (DMBs).
This strategic move comes amid the ongoing recapitalization efforts in the banking industry, which has seen no new developments this week.
BusinessNG Analysts are keenly observing the market dynamics, particularly focusing on banks that have initiated their recapitalization programs versus those that have yet to take action.
It would be noted that Nova Merchant Bank, a prominent player in the merchant banking sector, is reportedly preparing for a substantial capital raise of N160 billion.
Sources suggest that the bank plans to execute a combination of a Rights Offer and a Private Placement sale to secure the additional Tier 1 equity capital needed to comply with the Central Bank of Nigeria’s (CBN) statutory requirement of N200 billion for a national commercial banking license.
This potential transition reflects a broader trend where merchant banks are seeking to diversify their operations and tap into the lucrative deposit-taking market.
The Nigerian Exchange Ltd. (NGX) banking sector has responded positively to these developments. The NGX Banking Index exhibited a bullish trend this week, rising by 7.86% week-on-week (W-o-W) to close at 999.20. This increase is largely attributed to a resurgence of investor confidence in tier-one bank stocks. Notably, GTCO emerged as the standout performer, with a remarkable 28.40% year-to-date (YTD) gain. FBNH and ETI followed closely, recording YTD increases of 22.08% and 15.79%, respectively.
Despite these positive trends, not all banks have fared equally.
Accesscorp, although showing a recent week-to-date (WTD) improvement of 10.25%, continues to grapple with a YTD decline of -4.75%. In contrast, banks like Wema, Fidelity, and FCMB reported robust YTD returns, boasting increases of 41.07%, 31.80%, and 22.97%, respectively.
However, Tier 2 banks have struggled, with Sterling Bank seeing a significant YTD decline of -25.78%. Stanbic IBTC also reported negative YTD returns of -12.42%, despite a staggering 130.7% increase in interest income, which surged from N184.6 billion in Q3 2023 to N425.8 billion in Q3 2024.
As the banking landscape evolves, the anticipated transition of merchant banks into the commercial banking space may not only reshape the competitive dynamics but also influence broader market trends. Investors and stakeholders will be closely watching how these developments unfold in the coming weeks.
