Wema Bank, Sterling, three others under pressure as CBN recapitalization deadline nears

By Omodele Adigun

Nigeria’s tier-2 lenders, Wema Bank, Sterling Bank, First City Monument Bank (FCMB), Stanbic IBTC Bank and are facing mounting pressure ahead of the Central Bank of Nigeria’s (CBN) 2026 recapitalisation deadline.

A new report by SB Morgen (SBM) Intelligence highlights that the five lenders may have to scale up operations or risk being forced into mergers.

The report, titled “Capital, Competition, and Consolidation: How Nigeria’s Tier-2 Banks Are Responding to the CBN’s 2026 Recapitalisation Order,” warns that the new capital requirements will transform the banking landscape and determine which lenders remain competitive.

In March 2024, the CBN directed international banks to increase their capital base to ₦500 billion, national banks to ₦200 billion, and regional banks to ₦50 billion, with compliance set for March 2026. The policy, the apex bank said, is aimed at strengthening financial stability and preparing the sector to support the government’s ambition of building a $1 trillion economy.

SBM noted that the share price performance of these tier-2 institutions over the past five years reflects both challenges and resilience amid regulatory changes, economic volatility, and recapitalisation demands.

“Over the past five years, the share price trajectories of Nigeria’s leading Tier-2 banks — FCMB, Fidelity Bank, Stanbic IBTC, Sterling Bank, and Wema Bank — have reflected both the opportunities and challenges within the country’s evolving financial landscape,” the report said.

While Tier-1 banks have dominated with record profits, SBM observed that tier-2 banks have demonstrated resilience and, in some cases, outperformed expectations. Fidelity Bank, for example, saw its share price rise from ₦1.65 in 2020 to over ₦21.20 by mid-2025 — an increase of more than 1,100 percent, powered by strong earnings, digital expansion, and aggressive capital raising. Wema Bank followed a similar trajectory, climbing from ₦1.50 in 2020 to nearly ₦15.00 in 2025.

FCMB and Sterling Bank also recorded steady gains. FCMB’s share price grew from about ₦3.33 in 2020 to ₦9.25 by mid-2025, while Sterling tripled from ₦1.70 to ₦6.16, driven by retail and SME banking growth and disciplined asset management.

Each bank has adopted different strategies to meet the new capital thresholds.

FCMB Group plans to raise ₦400 billion in three phases. It has already completed a public offer of ₦144.6 billion — oversubscribed by 33 percent — and expects an additional ₦20–₦40 billion from a convertible note issuance. The second phase includes IPOs and private placements of minority stakes in subsidiaries, targeting ₦80–₦90 billion. A final phase will involve offshore private placements and preference share issuances to raise the balance.

Fidelity Bank has raised more than ₦270 billion through an oversubscribed public offer and rights issue. With shareholder approval to increase its share capital from ₦26.7 billion to ₦36.7 billion, the bank is preparing for the final phase of its capital-raising plan to meet or surpass the ₦500 billion benchmark for international banks.

Sterling Financial Holdings is pursuing private placements, rights issues, and a $400 million public offering to scale up its capital base.

Wema Bank is combining a ₦150 billion rights issue with a ₦50 billion private placement after successfully completing a ₦40 billion issue in 2023.

SBM predicts a wave of consolidation as the 2026 deadline draws closer, with mergers and alliances expected among mid-tier lenders.

“The financial performance of these mid-tier banks in 2025 underscores their capacity to compete and thrive, even as Tier-1 institutions consolidate their dominance,” the report said.

It noted that FCMB’s strong earnings, Fidelity’s capital market performance, and Wema’s digital transformation reflect a sector that is both dynamic and adaptable.

Despite challenges such as rising funding costs and the need for more non-interest income, SBM concluded that these banks have largely maintained profitability, efficiency, and asset quality.

The report added that tier-2 banks now stand at a critical juncture, with their survival hinging on how effectively they manage regulatory demands, leverage technology, and execute bold capital-raising strategies in the run-up to 2026.