Stanbic IBTC to raise N550 billion through rights issue and debt placement

Stanbic IBTC Holdings Plc is looking to raise N150 billion through a rights issue programme and N400 billion through a debt issuance programme, amounting to a total of N550 billion. 

These were part of the resolutions during the group’s Annual General Meeting held on May 16, 2024, in Lagos, Nigeria.  

Another resolution of the AGM was to increase the group’s share capital from the current N6.478 billion to N8.25 billion by creating an additional 3,543,002,837 ordinary shares. Presently, Stanbic IBTC Holdings has 12,956,997,163 fully issued ordinary shares. 

Stanbic IBTC Holdings has a paid-up share capital of N109.26 billion, a N90.471 billion shortfall from the N200 billion minimum capital requirement set by the CBN for the national banking license.

However, recall that Stanbic IBTC Holdings is a group that contains 10 direct subsidiaries such as Stanbic IBTC Bank Limited, Stanbic IBTC Pension Managers Limited, and Stanbic IBTC Asset Management Limited, among others.  

The group’s paid-up share capital is split among its direct and indirect subsidiaries, with about N62.469 billion allotted to Stanbic IBTC Bank Limited, which it wholly owns. Stanbic IBTC Bank’s paid-up capital is split into a N20 billion share capital and N42.469 billion share premium.  

Hence, the bank’s paid-up capital falls short by N137.53 billion of the minimum capital requirement set at N200 billion by the CBN for a national banking license, which the bank currently holds.  

By looking to issue an additional 3,543,002,837 ordinary shares and raise up to N150 billion from the rights issue, Stanbic looks to sell the new shares at a price level of around N42.  

Currently, Stanbic IBTC shares sell at N52.00, and the rights issue presents an opportunity for existing shareholders to acquire additional shares at a discounted price. However, it also has a potential dilutive effect on the shares of existing shareholders. 

Since the announcement of the banking recapitalization exercise, Stanbic IBTC’s share price has declined by 7.14% from N56.00 on March 28 to N52 as of May 17. With the announcement of the rights issue, the price is projected to decline further.   

According to Matilda Adefalujo, an Investment Research Analyst at Meristem Securities, investors often tend to display an initial pessimistic outlook during the right issues, considering the dilutive effect on their shares.  “The initial reaction is expected to be pessimism towards their Stanbic shareholdings. However, looking at the fundamentals, Stanbic has doing well in terms of profitability, as their Q1 2024 and FY 2023 numbers have been great.”

“It’s now left for Stanbic to sweat their loans and advances, as well as beef up their core operations to send a message to their investors that they can still provide good returns to them (investors).”

Another aspect to consider is the feasibility of raising the specified amount from the NGX, given the volume of rights issues anticipated on the exchange over the next two years.  

Since the announcement of the banking recapitalization exercise in late March, over N1 trillion worth of upcoming banking rights issue have been announced.

Apart from the rights issue programme, the group is also looking to increase its paid-up capital through a N400 billion debt issuance programme. The format of the bond issuance is yet unknown, however, the group’s board has received its shareholders’ approval to determine how they want to borrow the money and in what currency.