BankingFinancial Services

Sterling Financial Holdings to Seek Shareholder Approval for ₦200bn Fundraising

What’s this about?

  • Sterling Financial Holdings will seek shareholder approval at a June 24 meeting to raise ₦200 billion through a rights issue, offering 40 billion ordinary shares at discounted prices.
  • The fundraising aims to meet recapitalization requirements for the two Banking subsidiaries, Sterling Bank and the Alternative Bank, needing ₦142.8 billion and ₦10 billion respectively, with most funds expected to come from the Nigerian Exchange.
  • Excess capital raised beyond recapitalization needs will be invested in enhancing SME, retail, and digital banking, with a focus on innovation and strengthening their identity among young banking customers.

Zoom in…

At a general meeting scheduled for June 24, Sterling Financial Holdings Company will seek shareholder approval to raise ₦200 billion through a rights issue. The company will sell 40 billion ordinary shares to existing investors at discounted prices if that approval is granted.  

Sterling Financial Holdings has two banking subsidiaries, Sterling Bank and the Alternative Bank. Adjusted recapitalisation rules mean both banks need to increase their minimum paid-up capital. 

Per Sterling Bank’s full-year 2023 report, its total qualified capital (share premium and share capital) was ₦57.2 billion, implying a need for ₦142.8bn in additional capital since it is a national bank. Alternative Bank needs ₦10 billion to meet its capital requirements.

The holding company believes most of the capital can be raised from the Nigerian Exchange. 

What they are saying…

We are open to foreign sources of capital as an alternative but with our shareholders fully committed, hence our preferred approach is rights issue, followed by private placement,” said a Sterling Holding executive who asked not to be named. Tapping the NGX for capital will also ease communication with investors. 

If the company raises N200 billion, it will be more than it needs to meet capitalisation targets. It could deploy the remaining capital to enhance its SME, retail, and digital banking. 

We anticipate that they would keep their innovation curve steep and improve investment in establishing an even stronger identity among the young banking population,” Ikeoluwa Alabi, investment research analyst at Afrinvest Consulting Ltd told TechCabal. 

Source: techcabal.com

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