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Sterling Bank’s N12.5b rights issue opens

By on June 24, 2013

APPLICATION list for the N12.5 billion rights issue of Sterling Bank Plc opens today, paving the way for existing shareholders to increase their shareholdings in the high-return bank.

The opening of application list followed the completion of all pre-offer processes including final completion board meeting by board of Sterling Bank and other professional parties, approvals by the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) and unanimous approval of the shareholders of the bank.

Sterling Bank is raising N12.5 billion through a rights issue of about 5.889 billion ordinary shares of 50 kobo each at N2.12 per share. Sterling Bank had traded at a high of N3.05 at the stock market.

The shares have been pre-allotted on the basis of three new ordinary shares of 50 kobo each for every eight ordinary shares of 50 kobo each held as at May 20, 2013. Application list will run till July 31, 2014.

The net proceeds of the rights issue, estimated at N12.13 billion, would be used to finance branch expansion, infrastructure upgrade in support of automated and cashless payment, enhance information technology and additional working capital.

About 35 per cent of the net proceeds, estimated at N4.24 billion, would be used for branch expansion; 15 per cent of the funds estimated at N1.82 billion would be used for infrastructure upgrade, 10 per cent of the funds equivalent to N1.21 billion would be used for information technology and the largest chunk of 40 per cent, estimated at N4.85 billion, to be set aside as additional working capital.

Managing Director, Sterling Bank, Yemi Adeola, said the rights issue would enhance the capital base of the bank and enable it to create additional values for shareholders.

According to him, given the fact that Sterling Bank is one of the few financial institutions that have not raised new equity funds in the past seven years, the current fund raising would enhance the performance of the company and returns to shareholders.

“If with the modest capital that we have we were able to stabilise the bank, deliver consistently better returns to shareholders and build up to become the a top tier bank, imagine what we would do with more capital. Our shareholders have no reason whatsoever not to be excited in participating in the rights issue. You can’t regret it,” Adeola said.

He noted that the rights issue marked the beginning of the bank’s capital raising plan, which is meant to put the bank on stronger footing and further position it to compete effectively.

According to him, the bank plans to raise $80 million through the rights issue and $120 million through private placement to shore up the bank’s tier one capital.

He pointed out that the bank is embarking on additional capitalisation because size has become very key and relevant in the banking industry and the bank needs to open more branches and put in place enabling infrastructure for its unique retail banking franchise.

He added that additional working capital would enable the bank to expand the scope of its corporate banking business noting that the bank is currently limited by the single obligor limit, which is a function of available.

He exuded that shareholders have been rooting for the rights issue in demonstration of their appreciation for the bank’s growing fundamentals and returns over the years expressing confidence that the shareholders would all pick up their rights.

He pointed out that the decision to come to the capital market for equity issue was driven partly by overwhelming requests by shareholders for opportunity for additional investments during the capital raising programme of the bank.