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FCMB, Diamond Bank shop for new capital

By Chijioke Nelson
05 August 2016   |   1:43 am
Speculations that four Nigerian banks would soon look for funds to support operations are beginning to turn into reality as First City Monument Bank (FCMB) and Diamond Bank have signaled plans in that direction.
Mr Ladi Balogun, CEO First City Monument Bank

Mr Ladi Balogun, CEO First City Monument Bank<br />

Speculations that four Nigerian banks would soon look for funds to support operations are beginning to turn into reality as First City Monument Bank (FCMB) and Diamond Bank have signaled plans in that direction.

While FCMB is looking for N10 billion to N15 billion to shore up operations from its retail investors, Diamond Bank wants to raise fresh capital and sell some assets to scale up ratios, particularly the capital adequacy ratio, which has fallen 15.6 per cent of assets by June from 18.6 per cent a year ago.

There are heightened expectations that more banks’ workers would be laid off, while some branches will be closed and at extreme projections, some banks are unlikely to survive the challenging times.

This was followed with speculations that the regulator is monitoring one or two lenders for their liquidity levels, while four medium-sized banks might need to raise capital and soon.

The Chief Executive Officer of Diamond Bank, Uzoma Dozie, who affirmed the plans, said the move will ensure it meets all regulatory requirements both in the short and long terms.

“We are doing a capital management plan and that will determine how much capital we want to raise, tenor and size.

“We don’t have any need to grow our branch network any more. We are also looking at some assets that we can dispose of and we are a long way into that,” Dozie said during analysts’ conference call.

Meanwhile, the Chief Executive Officer of FCMB, Ladi Balogun, said its capital adequacy ratio was close to the regulatory limit of 15 per cent of assets at mid-year, and that it was undertaking the capital raising to provide an additional cushion.

He said the bank was also slowing down loan growth, adding that a rate of increase of 14.8 per cent in the first half was largely due to the 40 per cent drop in the value of the naira against the dollar since the dollar exchange rate peg was removed in June. Otherwise loans declined by 1.9 per cent.

“For the Tier II, we would be looking at anywhere in the range of N10 to N15 billion. It’s really going to be targeted at retail because we feel that the rates from institutions will be high,” he told an analysts’ conference call.

“We have interest from some depositors who want higher yields.”

Balogun said the bank would also retain profits in addition to the bond sale to boost capital and tap into buffers at its holding company, if necessary.

Already, FCMB, which closed 19 branches in the first half to cut costs, had $225 million in retained earnings, he said.

Recently, the Central Bank shored up mid-tier lender- Skye Bank, after replacing its management as capital ratios fell below levels required by regulators.

Since then, pressure is building, with loan books – nearly half of them in dollars, were aggravated by a shrinking economy, sliding currency and acute foreign exchange shortages.

Again, CBN has told lenders to set aside extra provisions against their dollar loans in the wake of the sharp fall in the naira since it floated the exchange rate in June.

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