…Targets expansion, higher profitability
By Emma Ujah, Abuja Bureau Chief
Infinity Trust Mortgage Bank Plc is set to raise ₦50 billion in fresh capital to strengthen its financial capacity, expand operations and improve its competitiveness in Nigeria’s mortgage banking industry.
The Chairman of the bank, Dr. Nkechi Bibilari, disclosed this after shareholders unanimously approved the proposed capital raise at the bank’s Extraordinary General Meeting (EGM) in Abuja.
The capital raise, amounting to ₦50 billion “or its equivalent”, will be pursued through one or a combination of options, including a rights issue to existing shareholders, private placement to strategic investors and an offer for subscription to the public.
To facilitate the exercise, shareholders authorised the board of directors to increase the company’s issued share capital to accommodate the new capital base and amend its Memorandum and Articles of Association accordingly.
They also approved the issuance, allotment and listing of the required number of ordinary shares on the official list of the Nigerian Exchange Limited (NGX). The new shares will rank pari passu in all respects with the company’s existing ordinary shares.
In addition, shareholders approved the board’s recommendation to convert 600 million preference shares of ₦1 each, valued at ₦600 million, into ordinary shares.
Explaining the rationale for the capital raise, the Managing Director of the bank, Mr. Luqman Bakare, said the initiative was designed to position the institution to take advantage of emerging opportunities in the financial services sector as Nigeria pursues its ambition of building a $1 trillion economy by 2030.
Bakare said the expanding role of the financial sector in the economy, alongside the Federal Government’s growth target, presented significant opportunities for financial institutions to scale up operations and contribute more to national development.
“When you look at the Nigerian economy and the role of the financial sector, you realise that the size of the sector in the economy is ever-expanding.
“The Federal Government has set a target of a $1 trillion economy by 2030. This shows that there is a lot of room for growth and that the players also have to rise to the challenge,” he said.
He noted that Nigeria’s financial services industry comprised commercial banks, mortgage banks, merchant banks, stock market firms, asset management companies and other quasi-financial institutions.
However, he said the mortgage banking subsector remained relatively small compared with other segments of the financial system.
“You realise that the size of our industry is among the smallest, as the aggregate size of the microfinance subsector, even with its numerous operators, is now somewhat bigger than that of the mortgage subsector,” he said.
According to Bakare, the proposed capital raise would enable Infinity Mortgage Bank to overcome the limitations imposed by its current size, expand its business and improve returns to shareholders, including minority investors.
He said the bank was determined to position itself to benefit from emerging opportunities in the Nigerian economy rather than be left behind.
“So you wonder, as an investor and as somebody interested in participating in and contributing to the Nigerian economy, why should I remain restricted in my role when I have the capacity and potential to grow, enhance shareholder value and improve returns and income for minority shareholders?
“When you look at the outlook, it supports the need for expansion, so that Infinity is not left behind,” he added.
The managing director also said the bank was adopting a forward-looking approach to its capital strategy, particularly following the recent recapitalisation exercise involving deposit money banks.
He expressed the expectation that the mortgage banking subsector could eventually face similar capital requirements, adding that Infinity was positioning itself ahead of any such policy announcement.
Bakare recalled that the Central Bank of Nigeria had increased minimum capital requirements for commercial banks to ₦200 billion for those with national authorisation and ₦500 billion for banks with international authorisation.
He said the development had raised questions about when similar requirements might be introduced for mortgage banks.
“Recently, the Central Bank announced an increase in the capital requirements of commercial banks, raising it to ₦200 billion for banks operating nationally and ₦500 billion for those operating internationally. So everybody was wondering when it would be our turn in the mortgage sector.
“While that is still being awaited, we felt the need to rise to that challenge,” he said.
Bakare explained that financial institutions in the sector largely sourced funds from the same market, making it important for mortgage banks to strengthen their capacity to compete for available capital.
“When you look at the sources of funding for financial businesses in this industry, they usually come from the same market. Whether you are into commercial banking or mortgage banking, you go to the same market for funding. So, if we are doing this now, it is in our interest,” he said.
He added that a stronger capital base would enable the bank to mobilise more funds, finance additional transactions and pursue profitable business opportunities.
According to him, the capital raise would also help attract investors who have confidence in Nigeria’s financial system and are willing to commit resources to its growth.
“If I have more capital at my disposal, and I know that these funds come from contributions by investors in other sectors who believe the system is right, they give me the opportunity to do more profitable business and increase profitability, which will ultimately translate into better returns for stakeholders,” Bakare said.
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