By Omodele Adigun
FCMB and Diamond Bank may soon hit the debt market to raise fund to shore up their capital ratios.
Some analysts said the move may not be unconnected with the order handed down by the Central Bank of Nigeria (CBN) to all banks to write off all foreign currency-denominated bad debts.
While FCMB is targeting between N10 and N15 billion in Tier II debt, Diamond Bank is running a capital management plan, which would determine how much it would raise.
Disclosing this to a foreign news service during an analysts conference call, the Managing Director of FCMB, Mr. Ladi Balogun, said his bank’s capital ratio was close to the regulatory limit of 15 per cent by half-year, and that it was doing the capital raising to provide some cushion. He said the bank was also slowing down loan growth.
“For the Tier II, we would be looking at anywhere in the range of N10 to N15 billion. It is really going to be targeted at retail investors because we feel that the rates from institutions will be high,” he added.
As for Diamond Bank, its Managing Director/CEO, Mr. Uzoma Dozie, said the bank is considering selling some assets, in addition to the capital raising, in order to maintain its capital ratios.
He explained that the bank’s capital plan would ensure that it meets all regulatory requirements both in the short term and in the future. The bank’s capital adequacy ratio had fallen to 15.6 per cent of assets by mid-year from 18.6 per cent a year ago.
He stated: “We are doing a capital management plan and that will determine how much capital we want to raise, tenor and size. We don’t have any need to grow our branch network any more. We are also looking at some assets we can dispose of and we are a long way into that,” Dozie told an analysts’ conference call.
Recall that CBN, in discovering a steep rise in hard currency debts in the nation’s banks following its revised guidelines on the operations of the Nigerian Inter-bank foreign exchange market, had ordered them to write off all the delinquent ones in line with its Prudential Guidelines for Deposit Money Banks in Nigeria of July 1, 2010.
In a statement sent to all the banks last week by its Director of Banking Supervision, Mrs. Tokunbo Martins, the apex bank frowned at the increase in the balances on foreign currency-denominated loans and advances in the books of banks, particularly those that are yet to be written off.