Zenith Bank, one of Nigeria’s leading financial institutions, is taking significant steps to enhance its capital base through a substantial rights issue and public offer aimed at raising approximately N290 billion. This initiative which will strengthen the bank’s capital base and support its growth initiatives is in response to the Central Bank of Nigeria’s (CBN) revised minimum capital requirements for commercial banks, which mandates a minimum capital of N500 billion. The offer consists of two components:
- Rights Issue: Existing shareholders will have the opportunity to purchase 5,232,748,964 ordinary shares at N36.00 per share. This allows them to maintain their proportionate ownership in the bank.
- Public Offer: In addition to the rights issue, Zenith Bank will offer 2,767,251,036 shares to the public at a price of N36.50 per share. This component attracts new investors and broadens the bank’s shareholder base.
The pricing of the shares is set at a level that offers immediate gains for investors. Based on the current market price of Zenith Bank’s shares, which stands at N48.00 as of August 9, 2024, the offer price represents a discount of approximately 32%. This means that investors who participate in the offer can potentially realize immediate gains upon the commencement of trading of the new shares.
The offering period commenced on August 1, 2024, and is set to conclude on September 9, 2024. This timeline allows ample opportunity for participation from various stakeholders, reflecting the bank’s commitment to inclusivity in its capital-raising efforts.
Key Highlights of the Rights Issue
- Capital Raise: Zenith Bank plans to issue 5,232,748,964 ordinary shares at N36.00 each for existing shareholders, while a public offer will present an additional 2,767,251,036 shares at N36.50 each. This structure allows existing shareholders to purchase additional shares in proportion to their current holdings, thereby reinforcing their investment in the bank.
- Market Opportunity: The pricing of the shares is designed to attract both existing and new investors, with the potential for a 32% immediate return based on current valuations. This positions the bank favorably in the market, especially given its historical performance and strong profitability metrics.
- Technological Investments: The capital raised will help meet regulatory requirements and support investments in the bank’s information technology infrastructure, enhancing operational efficiency and customer service capabilities.
- Strong Financial Performance: Zenith Bank has demonstrated robust financial health, with a pre-tax profit of N795.962 billion in 2023, making it the most profitable bank listed on the Nigerian Exchange. The bank’s share price has appreciated by approximately 57% over the past five years, reflecting its resilience and growth potential in the competitive banking sector.
Dame (Dr.) Adaora Umeoji, the Group Managing Director/CEO of Zenith Bank, expressed optimism regarding the rights issue, highlighting the enthusiasm from existing shareholders and the importance of including a public offer to broaden ownership. She emphasized that the inclusion of a public offer is crucial to broadening the bank’s ownership structure and attracting new investors. She noted that the bank has consistently rewarded its shareholders, maintaining a record as the highest dividend-paying bank in Nigeria.
Zenith Bank’s strong financial performance and consistent shareholder rewards have made it a preferred investment destination. The bank has maintained its position as the most profitable bank listed on the Nigerian Exchange, with a pre-tax profit of N795.962 billion in 2023, it paid a dividend of N4 per share, reinforcing its commitment to delivering value to investors.
Additionally, Zenith Bank has a track record of being the highest dividend-paying bank in Nigeria, further enhancing its appeal to investors. The bank’s share price has shown resilience, with a significant appreciation of approximately 57% over the past five years, despite a recent decline. The current offering price presents a favorable opportunity for investors to acquire shares below the 52-week high, potentially leading to immediate gains upon trading.
In addition to assisting Zenith Bank in meeting the updated minimum capital requirements for commercial banks set forth by the Central Bank of Nigeria, the funds raised through this hybrid offer will also be used to fund upgrades to the bank’s information technology infrastructure. By making these expenditures, the bank hopes to improve customer service and operational effectiveness and set itself up for future development and success in the cutthroat banking industry.
This is essential for increasing the bank’s service offerings and improving operational efficiency, especially in the areas of digital banking and financial inclusion initiatives. The monies, according to Dame (Dr.) Adaora Umeoji will also help the bank with its strategic growth plans, which include expanding internationally into francophone African nations and other areas.
Zenith Bank’s rights issue and public offer represent a strategic move to bolster its capital structure while offering a lucrative opportunity for investors. With its strong track record and commitment to growth, the bank is well-positioned to navigate the evolving financial landscape, making this capital raise a positive development for both the institution and its stakeholders.
Zenith Bank’s hybrid rights issue and public offer represent a proactive approach to strengthening its capital base and positioning itself for future growth. With a clear focus on enhancing technological capabilities and expanding its market presence, the bank is set to leverage this capital raise to enhance shareholder value and ensure long-term sustainability. The enthusiasm from existing shareholders and the appeal of the public offer underscore the bank’s strong reputation and commitment to value creation in the competitive Nigerian banking landscape.