Recapitalisation: Banks require N4.7trn to meet CBN’s new benchmark capital

CBN optimistic about impact of reforms in FX marketBanks in Nigeria may require up to N4.7 trillion to meet the recapitalization benchmark prescribed last week by the Central Bank of Nigeria, CBN.

Vanguards findings from the audited and unaudited financial positions of 12 leading banks in the Nigeria Exchange Limited indicated a funding gap of N2.8 trillion while others outside the Exchange is estimated at N1.9 trillion.

The CBN on March 28th announced the upward review of the minimum capital requirement for banks in the country.

The Apex bank mandated minimum capital of ¦ 500 billion, ¦ 200 billion and ¦ 50 billion for Commercial Banks with International, National, and Regional licenses respectively.

Likewise, the CBN also raised capitalisation baseline for Merchant Banks to N50 billion and Non-interest Banks to ¦ 20 billion and ¦ 10 billion for national and regional licenses respectively.

A breakdown of the cumulative figure shows that Ecobank Transnational Inc (ETI) has N353.3 billion Total Eligible Capital (TEC) living it with a funding gap of N147 billion, while Zenith Bank with TEC of N270.7 billion has a funding gap of NN229.3 billion as at September 2023 unaudited financial statement

Access Bank which has the most current financial statement audited as at December 2023 is recorded TEC of N251.8 billion still has a funding gap of N248.2 billion, while First Bank which recorded a TEC of NN251.3 billion in its unaudited financial statement as aat September 2023 would require additional N248.7 billion to meet the new capital base.

TEC for all other banks are significantly below N200 billion leaving them with funding gaps ranging between NN90.7 billion and N480 billion under the new TEC.

However, analysts believe if CBN adjusts its prescription to accommodate Retained Earnings (REs) about seven banks would be comfortably above the new minimum capital base.

The seven banks include Zenith Bank with largest REs at NN893.9 billion as at September 2023, followed by UBA with N750.8 billion as at September 2023 and Access with N715.1 billion in full year 2023 audited financial statement.

Others are ETI, First Bank, GTB and Stanbic IBTC recording N683.1 billion, N675.1 billion, N424.5 billion and N309.6 billion respectively in their REs.

Industry analysts hinted they are expecting CBN to give more clarifications on the policy especially regarding the treatment of REs.

The policy simply excluded REs from the new capital composition without stating how the outstanding REs should be treated in the bank’s balance sheet.

The CBN specified that minimum capital for existing banks should comprise only paid-up capital and share premium.

It is believe that if the apex bank remains silent the banks may re-engineer their asset compositions by recapitalizing the REs to meet the new capital requirement.