- UBA Plc seeks to raise its share capital to N22.5 billion to meet regulatory requirements.
- The bank will issue 10.8 billion new ordinary shares valued at N0.50 each.
- UBA is also exploring the option of issuing other financial instruments to raise additional capital.
CEM REPORT, FINANCE | UBA Plc (United Bank for Africa), Nigeria’s leading financial institution, is seeking approval from its shareholders to increase its share capital. This move comes as the bank seeks to strengthen its financial position and comply with recapitalization requirements.
In a notice signed by the Group Company Secretary, Bill A. Odum, UBA announced its intention to raise its share capital from ₦17.099 billion to ₦22.5 billion. This increase will be achieved through the issuance of 10.8 billion new ordinary shares, valued at ₦0.50 each.
The bank’s current combined share capital and share premium stand at ₦115.8 billion. However, this falls short of the ₦500 billion regulatory capital requirement by ₦384.2 billion.
“The move has become necessary as the bank tries to improve its capital base in line with regulatory requirements,” the notice stated.
Beyond Share Issuance: UBA Plc Exploring Additional Funding Options
While the issuance of new shares is a primary strategy for UBA’s capital increase, the bank is not limiting itself to this method. The notice highlights the Board of Directors’ request for authorization to raise additional funds through various means.
This includes the possibility of issuing different types of financial instruments, such as: Preference shares, Convertible and/or non-convertible notes, Bonds.
The notice further specifies that these instruments could be issued in the Nigerian and/or International Capital Markets. This allows UBA to tap into a wider pool of investors and potentially secure more favorable financing terms.
The bank can choose from various methods to raise capital, including public offerings, private placements, and rights issues. The specific approach will depend on market conditions, investor interest, and the bank’s strategic goals.
The notice emphasizes the board’s discretion in determining the best course of action. UBA Plc seeks the authority “to raise additional capital through the issuance of securities…at prices, coupon or interest rates determined through book building or any other acceptable valuation method or combination of methods.” This flexibility allows the bank to adapt to market conditions and secure the most favorable terms for its capital raise
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Following shareholder approval, UBA Plc will proceed with the capital raise plan. The bank will likely choose the most suitable method(s) based on market conditions and regulatory approvals. Obtaining the “requisite approvals of the relevant regulatory authorities” is a crucial step before executing any fundraising strategy.
Analyst’s Take:
Financial analysts suggest that UBA’s move to increase its capital base is a positive step, nothing that it will strengthen the bank’s financial position and enable it to support future growth initiatives.
However, analysts also caution that the success of the capital raise will depend on various factors, including investor sentiment and the overall health of the Nigerian economy.
Impact on UBA Plc and Investors
This capital raise is expected to strengthen UBA Plc’s financial position and ensure compliance with regulatory requirements. A stronger capital base can enhance the bank’s ability to absorb potential losses, lend more money, and invest in growth opportunities. However, the impact on existing shareholders depends on the chosen fundraising method. If UBA Plc opts for a rights issue, existing shareholders will have the first opportunity to purchase new shares, potentially diluting their ownership stake if they don’t participate.
