Pressure is now mounting on banks to make better use of their profits ahead of the next earnings season, findings show, after two years of chasing new funds, navigating tough regulations and pitching to investors.
With the recapitalisation exercise led by the Central Bank of Nigeria (CBN) now over, banks have raised a total of N4.65 trillion to meet new capital requirements. This has left the sector stronger and with more financial capacity, but the focus is now on how well the money will be deployed to create real growth.
But it has also reset expectations as the urgency for banks to survive has faded. Instead, there’s a sharper question from shareholders who funded the expansion. Now they are demanding proof that bigger banks can turn their larger capital bases into stronger, more consistent earnings and not just compliance comfort.
33 banks met the new regulatory threshold, the apex bank said. Heritage Bank was the only major casualty after it failed to improve its financial condition despite regulatory intervention, it was gathered.
While shareholders are set to gain N27 trillion, a significant leap from N21.97 trillion in 2024, they are worried that investors can’t live on announcements alone.
Chika Mbah, a retail investor 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. People want to see stronger dividends, stable earnings and share-price growth even in the next earning season.”
The recapitalisation exercise essentially transformed the scale of Nigerian banks. With larger shareholders’ funds, banks can now take on bigger transactions in infrastructure, energy, manufacturing and regional trade finance.
In terms of the current prudential guidelines, banks are able to 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 completely different challenges. Explaining the development, the Managing Director, Optimus by Afrinvest, Ayodeji Ebo, said the sector has moved from a solvency story to an execution story. “Banks that can efficiently deploy capital 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 expiry of CBN’s regulatory forbearance in 2025 forced lenders to acknowledge impaired loans that had been temporarily protected, particularly in the oil and gas sector. Meanwhile, higher interest rates have increased repayment pressure on corporate borrowers.
Several banks already noted weaker 2025 earnings tied to higher provisioning costs, while others maintained strong profitability.
Zenith Bank and Guaranty Trust Holding Company continued to be among the strongest performers, maintaining trillion-naira profit levels and sharing record dividends with shareholders.
Wema Bank also caught investors’ attention after it posted triple-digit profit growth, fuelled by loan growth and digital banking activity.
Other lenders have more complicated transitions to work through.
United Bank for Africa’s profits were pressured by large impairment charges related to the end of forbearance rules, while investors were cautious about the pending merger between Unity Bank and Providus Bank until integration risks were clearer.
Dividends, for many retail shareholders, are still the key test of whether the recapitalisation exercise was worthwhile.
Speaking at the 35th Annual General Meeting (AGM) of Zenith Bank Plc, the National Coordinator, Pragmatic Shareholders Association of Nigeria, Bisi Bakare, said he was satisfied with the Bank’s performance and was confident of future returns.
“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 N10 dividend and I believe by year end 2026, they are going to pay more, she said.
“Another shareholder who spoke on the condition of anonymity said they supported the banks because investors believed they would emerge stronger.”
He then said that shareholders are watching closely now. “If banks raise this level of capital, investors expect consistent returns and better corporate governance,” he explained.
The NGX Banking Index is currently at +57.68 per cent, attracting investor interest so far, but market analysts say the sector is no longer one uniform story.
Instead, the next stage will probably see a bifurcation between banks that have a strong capacity to deploy capital, diversified revenue streams and disciplined risk management, and those that are still struggling to translate larger balance sheets into sustainable profitability.
For investors, the recapitalisation might have answered the immediate question of banking stability.
The bigger question now is which banks can turn new capital into durable shareholder returns.
