Banks may raise $2.5b in bonds

By IAfrica
In Nigeria
Sep 3rd, 2014
0 Comments
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Banks may raise about $2.5 billion this year, compared with the $2 billion it raised in 2013, according to FBN Capital, the investment-banking unit of Nigeria’s largest bank by assets, FBN Holdings Plc.

Analysts said international debt sales are becoming more common as yields on Nigerian Eurobonds due July, 2023, declined 96 basis points this year. That compares with an average 35 basis-point drop in emerging-market yields, according to Bloomberg indexes.

The Central Bank of Nigeria (CBN) last month changed the way lenders calculate capital buffers. The regulator ordered banks it considered too big to fail to boost minimum capital ratios to 16 per cent last year, compared with 10.5 percent for South African lenders, which control most of the continent’s banking assets.

“Capital adequacy for many of the banks will be close to the minimum” once the changes are taken into account, Mike Nwanolue, an analyst at Lagos-based Greenwich Trust Group Ltd. Told Bloomberg.

The CBN removed some assets lenders can count as capital in preparation for the implementation of Basel II and III, while limiting Tier 2 capital to 33 percent of Tier 1 capital, according to an August 5 circular from the regulator.

Minimum capital requirements for lenders with operations outside the country was kept at 15 percent and at 10 percent for those with interests only in Nigeria.

The changes will shave 100 to 400 basis points off the capital adequacy ratios of most banks, Adesoji Solanke, an analyst at Renaissance Capital in Lagos, said.

Policy makers in 2010 set up the Asset Management Corp. of Nigeria, which spent N5.6 trillion  buying bad loans while taking over three of the eight banks it rescued with a N620 billion.

Two of the lenders, Mainstreet Bank Ltd. and Enterprise Bank Ltd., will be sold to new owners by September 15, AMCON Chief Executive Officer Mustafa Chike-Obi said in June. Divestment of Keystone Bank will follow.

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