Guaranty Trust Holding Company (GTCO) Plc plans to raise between N450 billion and N525 billion through a public offer to support the capital base of its subsidiary, Guaranty Trust Bank (GTB), TheCable can report.
The decision to raise capital comes three months after Olayemi Cardoso, governor of the Central Bank of Nigeria (CBN), said banks will be directed to recapitalise.
Recapitalisation is the process of infusing funds into banks to enable them to meet the mandatory capital adequacy set by a central bank.
It is also to stabilise a company’s capital structure and secure shareholders’ funds.
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The last recapitalisation in the banking industry was in 2004, when Charles Soludo, former CBN governor, raised their capital base from N2 billion to N25 billion.
According to Cardoso, banks are not liquid enough to service the $1 trillion economy President Bola Tinubu is aiming for in the near future, hence, the need to increase their capital base.
An insider at GTCO told TheCable there is a “strong indication the bank that will soon be in the market to raise N450 billion to N525 billion through a public offer is Guaranty Trust Holding Company Plc (GTCO Plc)”.
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The source said due to various macroeconomic factors, banks are considering a dilutive or non-dilutive approach to shore up their capital.
Dilutive funding results in ownership dilution, as the company sells shares in exchange for capital from investors, while non-dilutive funding allows the firm to retain ownership but comes with a debt burden, as the capital is offered as a loan.
“The capital will facilitate the enhancement of the bank’s ability to book large ticket transactions, as the effect of devaluation has impacted single obligor limits for most banks and thus their ability to book and participate in large ticket transactions,” the source said.
GTBank is one of many subsidiaries of GTCO, some of which are in the payment, funds management and pension funds management sectors.
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