FCMB Group considers selling stakes in subsidiaries

A meeting convened by the board of directors will ask shareholders next month to, among other options, assent to a plan by the lender to give up part of its interests in subsidiaries to potential investors in return for cash.

FCMB Group, owners of First City Monument Bank, will explore cutting back its ownership in subsidiaries to measure up to the expectation that its banking business raise core capital (excluding equity) to at least half a trillion naira by March 2026.

A meeting convened by the board of directors will ask shareholders next month to, among other options, assent to a plan by the lender to give up part of its interests in subsidiaries to potential investors in return for cash.

Proceeds from the deal, if that route, could help the lender meet the new capital requirements.

The financial services provider, who disclosed this in a note to the Nigerian Exchange on Thursday, has operations stretching across pensions, asset management, trusteeship, and micro-lending, among others.

The board, at its discretion, will “invest such portions of the proceeds of the divestments into First City Monument Bank Limited, as parts of steps to meet its capital raise objectives,” the statement noted.

In July, FCMB Group set out to source N110.9 billion through public offering in the first phase of its recapitalisation push at which it aimed for N150 billion from investors.

It now intends to beef up the capital to N340 billion, hoping to actualise that by considering a variety of options, which, apart from partial disposal of holdings in subsidiaries, include issuing debt and equity market instruments.

If need be, the bank holding company will turn to the international capital market to meet the regulator’s demand.

Lenders with international banking permits, including FCMB, have the most stringent recapitalisation conditions to meet the three categories of commercial banks set by the Central Bank of Nigeria (CBN).

FCMB Group holds an international banking permit like the big five banks – FBN Holdings, UBA, GTCO, Access Holdings and Zenith. It implies it has to buck up its core capital to a minimum of N500 billion even though it is not a top-tier lender.

The group’s readiness to try out as many capital raise options as possible spotlights the pressure small- and mid-tier lenders potentially face in courting investors, whose faith in top-tier counterparts is way stronger and likely to ease the path for the latter in the race to meet the deadline.

“We expect top-tier banks (top five banks in Nigeria by total assets) will be able to raise their announced capital targets with relative ease as their strong performance and dividend distribution could appeal to institutional and retail domestic investors alike,” SP Global said in a commentary this month.

But its outlook for smaller banks anticipates they will resort to merging with other lenders or going for a lower banking licence, alternatives more dire than conventional capital raise modes.

“We understand that most mid-tier and small banks will take up to the end of March 2026 to raise their capital shortfall,” the rating agency further said.