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Recapitalisation: NGX Banking Index Up 9.76%, Emerge Best-performing Indicator in January

Kayode Tokede
The Nigerian Exchange Limited (NGX) Banking Index exhibited exceptional performance in the first month of 2025, recording 9.76 per cent Year-till-Date (YtD) to emerge as the best-performing index January.
Analysis of trading numbers showed that the banking index surpassed the overall market indicator on the backdrop of huge demand for banking stocks.
As the NGX Banking index gained 9.76 per cent YtD to close at 1,190.35 basis points in January 2025, the NGX All-Share Index appreciated by 1.53 per cent YtD in January 2025 as investors trade the stock market with caution.
After a double-digit capital gain in 2024, bank stocks are showing early signs of a bullish year. With selloffs in the NGX Industrial Goods Index, NGX oil and gas and NGX Insurance Index dragging the market to a slow start, financial services and consumer goods stocks have been moderating the market situation.
Further analysis by THISDAY showed that the NGX Industrial Goods Index emerged as the worst performing index, dropping by 8.52 per cent in its YtD performance, followed by NGX Oil/Gas Index and NGX Insurance Index that depreciated by 1.61 per cent and 1.1per cent in their YtD performance, respectively.
Wema Bank Plc, followed by FCMB Group Plc led other banking stocks in price appreciation in January 2025.
The Wema Bank’s stock price gained 25.8 per cent to close January 2025 at N11.45 per share from N9.1 per share the stock opened for trading in 2025 while FCMB Group’s stock appreciated by 17.55 per cent to close January 2025 at N11.05 per share from N9.40 per share it closed for trading in 2024.
Stanbic IBTC Holdings saw its stock price at N64.35 per share as at the close of trading activities in January, 11.71 per cent increase over N57.60 per share it opened for trading in the period under review.
So far, only three banks have released unaudited financial statement for full year ended December 31, 2024.
While Wema Bank declared N102.1 billion profit in 2024, about 134 per cent increase over N43.66 billion in 2023, while FCMB Group posted N117.29 billion profit in 2024, representing an increase of 12.3 per cent from N104.43 billion declared in 2023.
In addition, Stanbic IBTC Holdings closed 2024 with N303.8 billion profit, a growth of 76 per cent from N172.91 billion reported in 2023.
Meanwhile, the listed banks on the Exchange have either concluded their capital raising exercise, or still in the process of meeting the CBN requirement before 2026.
Already, three banks have met the new minimum capital requirements for their licences. Seven banks successfully floated offers in 2024, with emerging results showing substantial oversubscription.
The Securities and Exchange Commission (SEC), the apex capital market regulator, had confirmed that banks raised some N1.7 trillion in new equity funds, in less than one-third of the current recapitalisation timeline.
The CBN in March 2024 released its circular on review of minimum capital requirement for commercial, merchant and non-interest banks. The apex bank increased the new minimum capital for commercial banks with international affiliations, otherwise known as mega banks, to N500 billion; commercial banks with national authorisation, N200 billion and commercial banks with regional license, N50 billion.
Others included merchant banks, N50 billion; non-interest banks with national license, N20 billion and non-interest banks with regional license will now have N10 billion minimum capital. The 24-month timeline for compliance ends on March 31, 2026.
Under the new minimum capital base, CBN uses a distinctive definition of the new minimum capital base for each category of banks as the addition of share capital and share premium, as against the previous use of shareholders’ funds.
While most banks have shareholders’ funds in excess of the new minimum capital base, their share premium and share capital significantly fall short of the new minimum definition. This implies that nearly all banks will need to beef up their capital base to meet the new definition of qualified capital.
Investment banking experts said with the strong start and continuing investors’ appetite for banking stocks, banks are on stronger footing to retain their licences.
Experts noted that banks have the advantages of enthusiastic existing shareholders and new investors, including foreign investors who have shown stronger appetite for Nigerian stocks in recent period.
The Managing Director, Globalview Capital Limited, Mr. Aruna Kebira, said the expectations in the capital market is that banks would largely be able to meet their capital requirements, citing the enthusiasm shown so far, as indicated by the 2024 offers.
According to him, banks have a lot of positive things going for them, which place them in better position to substantially outperform the 2004 recapitalisation scenario.
“In 2004, when the same exercise was foisted on the sector, we saw a lot of business combinations in the form of mergers and acquisitions. But after the general market meltdown, regulation has gone to a higher level.
“In 2025, the exact of what happened then is not expected. Quarterly and yearly earnings from the banking sector have been reflecting the true position of operations, which was opposite 21 years ago.
“To a very large extent, the market is not expecting any merger and acquisition as it believes that each bank would rise to the occasion and do the needful. Recapitalisation must not necessarily be from rights issues and public offers only. It could be from private placement and other strategic investments,” Kebira, a senior investment banker, said.
He noted that banks’ resilient earnings and ability to optimize shareholders’ value would support the sector’s recapitalisation exercise.
According to him, investors are looking beyond the current share pricing and macro-economic situation into post-recapitalisation period, when banks would be bigger and in better position to deliver higher returns.
“The market is also looking towards a better outing for the banks after the recapitalisation exercise. It believes that more investable funds would be at their disposal and for what the sector is known, such funds would be judicious deployed. At that point, they will generate commensurate earnings to counter the increase in the share capital base and the dilution in the earnings per share (EPS).
“The market has also noted that the banking sector has been paying less than 50 per cent of their EPS as dividends and as such, while the exercise is concluded and the effect of the funds has not fully reflected in their operations, they would still be able to pay commendable dividend,” Kebira said.
Speaking, the Managing Director, APT Securities & Funds, Mallam Kasimu Kurfi, said the banks still have enough time to be able to raise funds and meet their recapitalisation target.
“The period to conclude recapitalisation is still over a year, so it is too early to assume merger. We are hoping other banks will come to the capital market and be able to meet up their capital requirements,” Kurfi, a senior investment banker and member of the board of SEC, said.
On his part, Managing Director, Arthur Steven Asset Management, Mr. Olatunde Amolegbe, said banks would ride on the back of strong fundamentals and large investors’ base to successful recapitalisation.
“I believe most of them will succeed not only because of their strong fundamentals but also because the investor base they will be targeting included both foreign and local investors. Again the market has sufficiently proven that it has absorptive capacity, so if these issues are well-packaged and well-priced, then there shouldn’t be any problems,” Amolegbe, a former president of Chartered Institute of Stockbrokers (CIS), said.
He said there are various options for the banks to meet the recapitalisation deadline.
According to him, banks could also use the opportunity of the recapitalisation exercise to foster their strategic expansion plans as size would have significant influence in the post-recapitalisation period.