Recapitalisation: Banks to accentuate fundraising as CBN deadline nears

The analysts at Coronation Asset Administration have projected elevated capital market actions as banks push to fulfill the March 2026 recapitalisation deadline set by the Central Bank of Nigeria.

This was disclosed in its Yr in Assessment and 2026 Outlook revealed on Tuesday.

In response to the CBN, 16 banks have met the brand new capital thresholds, with the others anticipated to do the identical within the weeks main as much as the expiration of the deadline.

Commenting on the method and its influence on the sector within the outgone 12 months, the report learn, “The defining theme has been the industry-wide recapitalisation drive, spurring a sequence of capital market actions as banks race to fulfill the March 2026 deadline. The exit from the CBN’s forbearance scheme has additionally had a big impact within the second half of the 12 months. Whereas investor sentiment has been blended, resulting in sector underperformance relative to the broader market, the outlook is anchored by this strengthening of capital bases and an anticipated normalisation of earnings in direction of core banking actions in 2026.”

“Most Tier-1 and a few Tier-2 banks, together with GTCO, Zenith, UBA, Stanbic IBTC, Jaiz, and Entry Holdings, have accomplished their capital-raising programmes via rights points, public affords, and personal placements. Whereas others like FCMB, FBN Holdings, Constancy, and Sterling have CBN approval for a number of affords already in place or within the pipeline.

With about three months to go, we anticipate to see extra capital market actions and remaining calls on capital elevate programmes.”

On the profitability entrance, the analysts affirmed that the Nigerian banking sector remained broadly resilient via 2025, supported by sturdy stability sheet enlargement and strong liquidity, however headline profitability softened.

“Excessive funding prices, rising impairments, and regulatory adjustments, together with forbearance withdrawal, the windfall tax on international trade features, and the continued recapitalisation drive, have impacted the sector. Profitability has risen extra softly in comparison with final 12 months’s document earnings, with {industry} pre-tax revenue rising by 5.2 per cent year-on-year. This smaller progress is because of a mixture of upper loan-loss provisions, increased working prices amid persistent inflationary pressures and elevated rates of interest.”

It added, “Manufacturing and trade-related exposures have accounted for a notable share of the rise in impairments, as import-dependent debtors deal with tighter FX entry and elevated enter prices. In the meantime, the oil and gasoline upstream section has proven relative resilience, supported by improved crude costs and stronger money flows to this point within the 12 months. In distinction, downstream and energy sector loans have seen decrease restoration as a consequence of rising receivables and delayed tariff changes.”

On the capital market, the NGX Banking Index superior by over 30 per cent year-to-date, nevertheless it underperformed the broader NGX All-Share Index, which is up over 50 per cent.

The specialists adjudged the sector’s efficiency to be blended, reflecting divergent investor sentiment throughout Tier-1 and mid-tier banks.

“Among the many massive caps, Zenith Bank (+39.6 per cent ytd), Guaranty Trust Holding Co (+55.1 per cent ytd), Ecobank Transnational Inc (+30.4 per cent ytd), and United Financial institution for Africa (+17.1 per cent ytd) posted strong features, supported by sturdy earnings fundamentals, strong capital positions, and dividend declarations.

“Mid-tier names confirmed stronger momentum, with Wema Bank (+104.4 per cent ytd), Stanbic IBTC (+82.3 per cent ytd), and Sterling Monetary Holdings (+31.3 per cent ytd) recording substantial year-to-date features, pushed by improved profitability and investor rotation into worth performs. In distinction, Entry Holdings (-12.8 per cent ytd) lagged as a consequence of a delay in H1 earnings outcome publication and uncertainty round dividend funds,” stated the agency.

On the outlook for the New Yr, Coronation Asset Administration stated it’s anticipating coverage charge cuts, which ought to stimulate lending exercise, “whereas disciplined credit score administration, improved asset yields, and progress in fee-based earnings are anticipated to underpin a gradual restoration in curiosity earnings and general sector efficiency. We consider the sector is well-positioned to change into a significant driver of progress in 2026 as macroeconomic stability step by step returns. Enhancing inflation dynamics, higher FX liquidity, and a much less risky interest-rate setting ought to ease stress on funding prices and threat belongings.

“Whereas declining yields might mood margins, stronger core earnings, increasing mortgage books, and improved capital flexibility are anticipated to help profitability and stability sheet progress. With regulatory cleanup largely behind the sector and capital buffers strengthening, banks are higher positioned to scale lending, help funding exercise, and ship extra sturdy worth creation over the medium time period.”