FCMB Group considering debt-to-equity swap to meet CBN’s forbearance conditions

FCMB Group will explore a debt-to-equity swap among the mix of options at its disposal to satisfy an order from the Central Bank of Nigeria (CBN) demanding that lenders that enjoyed regulatory relief during the COVID-19 crisis regularise the problem loans in their books

The financial services organisation also expects to bring credit facilities above the allowable threshold for a single borrower under limit soon to avert the regulator’s rebuke, it stated in a statement on Tuesday.

According to the document, First City Monument Bank, the group’s commercial banking arm, has a customer in this category with a performing loan even though the exposure is above the statutory level.

“This obligor will be brought within SOL limit by September 30th, 2025, following the conversion to equity of a recently concluded N23.1 billion Convertible Loan and audited nine (9) months projected retained earnings,” it said.

Such efforts are critical to FCMB Group’s plan to keep its total lending to a single borrower or group to a maximum of 20 per cent of equity, as the CBN requires.

By converting the debt into equity, the expectation is that the move will help boost shareholders’ fund, while the portion of the net profit for the first nine months of the year is equally expected to create buffers that can strengthen the lender’s capital adequacy.

Measures taken to arrest the spread of the coronavirus in 2020, including the lockdowns implemented by governments, crippled economic activities, forcing many borrowers, especially businesses, to default on loans.

As succour for banks, the CBN relaxed banking regulations to allow banks to restructure the stressed loans, extend facilities beyond their expiry dates and not make full provision for them, comforts that they ordinarily will not enjoy under normal circumstances.

Last Friday, the CBN issued a circular ordering such banks to regularise the loans and barred them from paying dividends, issuing executive bonuses and implementing plans to expand outside Nigeria until they comply with the directive.

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“In recent years, we’ve seen CARs appear robust, even as concerns around the impact of several macroeconomic shocks on real loan recoverability have grown louder,” Meristem Securities said in a note to clients on Wednesday, seen by PREMIUM TIMES.

“Many of these loans—especially to upstream oil & gas and refining counterparties—are in Stage 2 or restructured under forbearance terms.”

A report by Renaissance Capital on Monday listed the errant lenders as Zenith Bank, First HoldCo, Fidelity Bank, FCMB Group, United Bank for Africa and Access Holdings.

Guaranty Trust Holding Company and Stanbic IBTC Holdings, which also enjoyed the relief, had cleared their forbearance exposures before the directive was issued, it added.

FCMB Group said its banking subsidiary reduced its forbearance exposures from N538.8 billion to N207.6 billion between 30 September 2024 and 31 May 2025.