Fidelity Bank shares soar on capital raise, but rally falters

Fidelity Bank’s share price experienced a brief surge on Wednesday, closing at its highest point in nearly four months, following the announcement of a capital raise through rights issue and public offering.

The bank closed at N10.80, surpassing its February 15 mark of N10.85. However, the rally fizzled out by Thursday, with the share price dropping to N9.75.

Fidelity aims to raise N127.1 billion to comply with the Central Bank of Nigeria’s (CBN) newly introduced minimum capital requirement for local lenders.

The CBN’s directive, announced in March, requires commercial banks with international authorization to hold a minimum capital of N500 billion.

The policy aims to strengthen the financial system and support economic growth. Over 20 Nigerian lenders, including Fidelity, need to raise additional capital within two years to meet this threshold.

One-for-10 shares

Fidelity’s share sale commences on June 20 and concludes in July.

Holders of Fidelity Bank shares as of January 4 can buy one share for every 10 they hold at N9.25 under the rights offer. Others can buy at N9.75 under the public offer.

The bank’s shareholders approved the capital raise plan last August. Funds generated will be invested in online infrastructure, business and regional expansion, and product distribution channels.

This announcement follows similar capital raise plans from other top-tier Nigerian lenders like Guaranty Trust Holding Plc, Access Holding, and FBN Holdings.

The CBN emphasizes the need for these buffers to help lenders weather economic challenges, support economic activity, and promote growth, particularly in light of recent naira devaluations and a challenging economic climate.

Nigeria has been grappling with high inflation and sluggish growth for the past decade. Government efforts to stimulate growth have inadvertently exacerbated inflation, leading to interest rate hikes and a worsening cost-of-living crisis.