United Bank for Africa (UBA), a Nigerian banking giant valued at over ₦1 trillion, has announced plans to raise fresh capital by selling 10.8 billion new ordinary shares. The bank intends to prioritize existing investors in the upcoming share sale.
Share Price and Meeting Details
Each share will carry a nominal value of ₦0.50 kobo, with the actual selling price to be disclosed at an annual general meeting scheduled for May 24, 2024. While the precise fundraising target has not been revealed, banks of UBA’s stature are now expected to maintain a minimum paid-up capital of N500 billion.
Diversified Capital Raising Strategy
In addition to the sale of ordinary shares, UBA plans to raise additional capital through the sale of preference shares, convertible and/or non-convertible notes, bonds, or other financial instruments. This comprehensive approach aims to ensure the bank’s robust capital position to support its growth and strategic initiatives.
Market Analyst Insights
According to a stock exchange market analyst, UBA’s shares closed at N25 each yesterday, implying that the bank may need to offer them at a discount to attract investors in the upcoming sale.
Financial Performance and Asset Growth
In a recent corporate disclosure, UBA reported a 5% year-to-date increase in total assets, reaching N974.47 billion in March 2024, compared to N931.95 billion in December 2023. Notably, cash and cash equivalents saw an impressive 121% growth during the same period, underscoring the bank’s liquidity strength.
Recapitalization History and Expectations
The last recapitalization drive in Nigerian banking occurred in 2004 when the Central Bank of Nigeria (CBN) raised the capital base from ₦2 billion to ₦25 billion. This led to mergers and acquisitions, reducing the number of banks from 89 to 25. Similar consolidation efforts are anticipated before the CBN’s 24-month deadline, with tier-1 banks like UBA expected to meet the requirements relatively smoothly.
Source: TechCabal