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FITCH DOWNGRADE: FCMB, Diamond Banks, others eye share offers



FITCH DOWNGRADE: FCMB, Diamond Banks, others eye share offers

Some banks in Nigeria have begun the process of revamping and shoring up their capital base following a recent downgrade in rating by an international rating agency, Fitch Ratings.

The outfit had in its report end-of -the year publication on November 20, 2016 stated that the support rating floors (SRFs) of 10 of the 20 banks in Nigeria had fallen into ‘No Floor’ as compared with nine others, with only some qualified ‘Support Ratings (SRs) to ‘5’ .

It said nine of the banks performed poorly that they were reduced from B+ B- on the grounds of inability to raise their credit base in the past one year.
Sources close to most of the banks said the boards and managements were jolted by the report and had immediately started adopting some measures aimed at repositioning their institutions.
Included in the measures is approaching the public, through the stock exchange for share offers, as soon as possible.
Three banks are known to have shown inclination towards raising their capital base above the minimum N25 billion approved by the CBN.

Among them are FCMB, which has dusted up its earlier plans to rise about N8 billion via the second tier supplementary debt review system by the end of the fourth quarter.

Read also: Fitch downgrades Nigerian banks, can’t meet 2020 growth

Diamond Bank, Access Bank and GTB, which in August 2016 each had limited offer have said they would be targeting a total of N48 billion between 2016 year-end to first quarter of 2017.

To shore up public confidence, some of the banks have been posting impressive pre-tax profits in their unaudited fourth quarter financial reports.

For instance, while FCMB says it is anticipating about N2.7 billion in the same period, Diamond Bank and UBA say they each expect to have more than 20 per cent increase in their pre-tax profits.

But analysts say this may not happen until the banks are able to up their lending rates, which have been fraught with a number of negative factors, affecting inability of borrowers to service more than 60 per cent of such loans?

The high interest rate in the system has also reduced the demands for loans from the banks by the real sector.

By Emma Eke….

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