Several Nigerian banks are deploying a combination of traditional, innovative and unconventional strategies to meet that bank recapitalization targets.
This is according to information from staff and top executives of some of the commercial banks who spoke to Nairametrics under the condition of anonymity.
Banks including Access Bank, Zenith Bank, Fidelity Bank, and FCMB, are currently in the midst of a significant recapitalization exercise aimed at raising a combined total of N1.29 trillion within a three-month period. Nairametrics expect other banks to join the fray in the coming weeks and months.
Zenith Bank, one of the key players in this exercise, has set a target of N290 billion, while Access Bank is aiming to raise N351 billion.
Fidelity Bank which just concluded the first phase of its capital raise, announced it successfully met its N127 billion target, and FCMB is looking to secure N110.9 billion. GTCO, another major player, has set the most ambitious target of N400.5 billion.
This initiative comes as deposit money banks across the country seek to strengthen their capital bases in response to the central bank’s recapitalization mandate imposed on all banks as part of its regulatory requirements and the need to meet the one trillion dollar gross domestic product for the country.
The recapitalization drive is not only a response to regulatory requirements but also a strategic move to enhance the banks’ ability to compete in an increasingly challenging financial landscape. With the Central Bank of Nigeria (CBN) enforcing stricter capital adequacy requirements, banks are under pressure to bolster their capital bases to remain compliant and competitive.
Strategies deployed by banks
Nairametrics research indicates the banks have deployed a mix of traditional and innovative strategies to achieve this capital raising target.
Engaging Foreign Investors: Many of the banks have embarked on international roadshows to attract foreign investors. These roadshows provide a platform for the banks to showcase their growth potential and solidify investor confidence in Nigeria’s banking sector.
Leveraging Supplier and Contractor Relationships: In a more unconventional approach, some banks have reportedly made it a condition for their suppliers and contractors to participate in their public offers. Those who do not comply risk being blacklisted, demonstrating the banks’ determination to secure funding from all available avenues.
Internal Target Setting for Staff: Banks have also set ambitious targets for their staff to contribute to the capital raise. For example, in some cases, employees are encouraged to meet specific targets by marketing shares to their networks, including existing customers, family, and friends. This strategy not only helps in raising capital but also deepens the employees’ engagement with the bank’s financial success.
High Net-Worth Individuals (HNIs) and Existing Shareholders: The banks are tapping into the wealth of High Net-Worth Individuals (HNIs) with significant disposable income to invest. Additionally, existing shareholders with large stakes are being encouraged to purchase more shares, thereby boosting the overall capital pool.
Institutional Investors: Pension funds, mutual funds, insurance companies, and other financial institutions are being approached as key participants in the recapitalization efforts. These institutions typically have large reserves and are critical in providing the long-term capital needed by the banks.
Notably, they have intensified efforts to attract foreign investors through extensive roadshows, engaging potential investors across key global financial hubs.
These roadshows are designed to showcase the banks’ growth potential, robust financial performance, and strategic plans, with the aim of securing substantial investments from international markets.
Foreign investors are considered critical to banks recapitalization plans especially due to the fact that their capital inflows are in foreign currency and when converted represents a significant inflow for the bank.
Some banks have also reportedly leveraged their relationships with suppliers and contractors, requiring them to purchase shares or other financial products as a condition for maintaining business ties.
This tactic, although unconventional, highlights the lengths to which these institutions are willing to go to meet their capital targets. According to a source, some banks have threatened to blacklist suppliers that d not support their recapitalization plans by purchasing their shares.
Banks are also relying on the traditional but radical strategy of relying on their employees to meet their targets. Targets are being set not only for all market-facing employees but also for back office operational staff.
The strategy is focussed on leveraging the banks employee headcount as an army of marketers who can leveral on their personal relationships with family and friends to raise capital.
For instance, a bank with 5,000 employees could potentially raise N50 billion by setting individual targets of N10 million each.
This approach has placed significant pressure on staff members, who are now expected to market financial products aggressively to existing customers, family members, and friends. Most banks also set massive targets for their regional offices with key executives mandated to look within the states they cover to mobilize capital.
In addition to these internal efforts, the banks are also tapping into funding from high-net-worth individuals (HNIs) and existing shareholders with significant stakes in the institutions. These investors are being courted with tailored offers and incentives, designed to encourage substantial contributions to the recapitalization effort.
Other financial institutions, such as pension funds, mutual funds, and insurance companies, are also being targeted as part of the capital-raising strategies.
These entities, which typically hold large reserves of investable funds, are seen as critical to the success of the recapitalization efforts. Institutional investors like pension funds are especially critical to banks that are raising right issues.
Analysts have noted that the success of these recapitalization efforts will depend largely on the banks’ ability to effectively execute their strategies and navigate the complexities of the current economic environment. The use of unconventional tactics, such as leveraging suppliers and internal staff, may raise questions about sustainability and the long-term impact on relationships with stakeholders.