Nigerian Bank FCMB Sees Capital Staying at ‘Comfortable’ Levels

LAGOS (Capital Markets in Africa) – FCMB Group Plc, a Nigerian lender which some analysts have said may need to raise capital, expects to remain comfortably above regulatory requirements for the rest of 2017.

The Lagos-based bank raised 7 billion naira ($23 million) by selling bonds in the last quarter of 2016, “which was used to refinance term deposits and modestly increased capital,’’ Ladi Balogun, chief executive officer of First City Monument Bank Ltd., said in e-mailed response to questions. “We expect to be above 17 percent in 2017, which is the level at which we are comfortable,” compared with a capital adequacy ratio of 15 percent required by the central bank, he said.

FCMB is among seven lenders including FBN Holdings Plc, Diamond Bank Plc and Union Bank of Nigeria Plc that may need to raise capital or “aggressively capitalize earnings” in the next year, Afrinvest West Africa Limited said in a note earlier this month. Levels of provisioning are too low, investor sentiment is negative toward Nigeria and the economy has deteriorated, which will mean that access to markets for lenders seeking debt and equity financing would remain “tight,” the Lagos-based researcher said.

Nigeria is in the grips of a yearlong recession as the country struggles to cope with oil prices that have halved since mid-2014 and a shortage foreign currencies that has caused the naira to plunge in value. The economy’s woes have spilled onto the books of the country’s small- and medium-sized banks, with troubled loans across the industry soaring to almost three times the regulatory limit. Capital ratios for the country’s biggest banks weakened to an average 15.65 percent at the end of June.

FCMB, the best performing Nigerian bank stock this year after Unity Bank Plc with gains of 23 percent, had a capital ratio of 16.9 percent in the third quarter, after it dipped to 15 percent at the end of the first half.

“We are not in dire need of additional capital,” Balogun said.