Banks under pressure to turn N4.65trn capital, profits

By Chinwendu Obienyi

After two years of chasing new funds, meeting tough regulations and pitching to investors, pressure is now building on banks to make better use of their profits before the next earnings season, Daily Sun findings show.

With the recapitalisation exercise led by the Central Bank of Nigeria (CBN) now completed, banks have raised a combined N4.65 trillion to meet new capital requirements. While this has strengthened the sector and boosted their financial capacity, attention is shifting to how effectively the money will be used to drive real growth.

However, it has also reset expectations as the urgency for banks to survive has faded. In its place is a sharper question from shareholders who funded the expansion. They are now demanding proof as to whether larger banks can translate their enlarged capital bases into stronger, more consistent earnings and not just compliance comfort.

According to the apex bank, 33 banks met the new regulatory thresholds, while Daily Sun learnt that Heritage Bank became the only major casualty after failing to improve its financial condition despite regulatory intervention.

Although the shareholders are poised to reap N27 trillion, marking a sharp increase from the N21.97 trillion recorded in 2024, they fear that investors cannot survive on announcements alone.

A retail investor, Chika Mbah, who participated in the rights issues of both Fidelity Bank and Access Holdings, said, “The capital raise was necessary, but investors cannot survive on announcements forever because people want to see stronger dividends, stable earnings and share-price growth even in the next earning season”.

The recapitalisation exercise fundamentally changed the scale of Nigerian banks. Larger shareholders’ funds now allow banks to take on bigger transactions in infrastructure, energy, manufacturing and regional trade finance.

Under current prudential guidelines, banks can lend up to 20 per cent of shareholders’ funds to a single borrower. Analysts say the expanded capital base now positions leading lenders to anchor billion-naira infrastructure transactions that were previously beyond reach.

They also warn that raising capital and deploying it profitably are entirely different challenges. The Managing Director, Optimus by Afrinvest, Ayodeji Ebo, noted that the sector has moved from a solvency story to an execution story. “Banks that can deploy capital efficiently into quality assets will sustain returns. Those that simply hold excess liquidity may face pressure on return on equity over the next few years”, Ebo said.

The end of regulatory forbearance by the CBN in 2025 forced lenders to recognise impaired loans that had been temporarily shielded, particularly in the oil and gas sector. At the same time, elevated interest rates have increased repayment pressure on corporate borrowers.

Several banks already reported weaker 2025 earnings linked to higher provisioning costs, even as others maintained strong profitability.

Zenith Bank and Guaranty Trust Holding Company remained among the strongest performers, sustaining trillion-naira profit levels and rewarding shareholders with record dividends.

Wema Bank also drew investor attention after posting triple-digit profit growth driven by loan expansion and digital banking activity.

Other lenders face more complicated transitions.

United Bank for Africa saw profits pressured by large impairment charges tied to the end of forbearance rules, while investors remain cautious over the pending merger between Unity Bank and Providus Bank until integration risks become clearer.

For many retail shareholders, dividends remain the key test of whether the recapitalisation exercise was worthwhile.

Speaking recently at the 35th Annual General Meeting (AGM) of Zenith Bank Plc, National Coordinator of the Pragmatic Shareholders Association of Nigeria, Bisi Bakare, expressed satisfaction with the Bank’s performance and confidence in future returns.

She noted: “As shareholders of Zenith Bank Plc, we are very happy because what we are after every year is return on our investments, and today we are getting a N10 dividend, and I believe by year end 2026, they are going to pay more.

Another shareholder who spoke to Daily Sun on the condition of anonymity, said they supported the banks because investors believed they would emerge stronger,”

He then added that shareholders are watching closely now. “If banks raise this level of capital, investors expect consistent returns and better corporate governance”, he explained.

Currently, the NGX Banking Index stands at +57.68 per cent, thus attracting investor interest so far, but market analysts say the sector is no longer one uniform story.

Instead, the next phase will likely separate banks with strong deployment capacity, diversified earnings and disciplined risk management from those still struggling to translate larger balance sheets into sustainable profitability.

For investors, recapitalisation may have solved the immediate question of banking stability.

The bigger question now is which banks can turn fresh capital into durable shareholder returns.