A N542 billion accumulated profit in the balance sheet of Nigerian banks as at September 2017, which is 8.33 percent higher than the N500.12 billion recorded the previous year, may allow them pay a higher dividend.
Also, such a robust retained earnings means these lenders have enough money to plunge back into the business to finance future expansion plans without having to tap owners or the public for fresh capital.
Analysts say the big lenders could record profit growth when they release their 2017 audited financial statement, which means owners, being risk takers, will be rewarded.
However, analysts added some of them may be hindered from rewarding shareholders due to poor capital adequacy issues, and poor asset quality brought on by high non-performing loans.
The banks are Zenith Bank Plc, Access Bank Plc, Diamond Bank Plc, Fidelity Bank Plc, First City Monument Bank (FCMB) Plc, Guaranty Trust Bank (GTBank) Plc, Stanbic IBTC Holdings Plc, First Bank Holdings Plc, United Bank for Africa (UBA), Union Bank Plc, Unity Bank Plc and Wema Bank Plc.
“We expect banks that pay historical dividend to do so this year as they are expected to make a profit,” said Gloria Fadipe, head of research at CSL Research Limited.
“However, we don’t expect huge dividend from Diamond Bank and First Bank Holdings Plc and those with negative retained earnings are not expected to declare dividend because such payment can only be made out distributed profit,” said Fadipe.
If the last statement by Fadipe holds water, then shareholders of some banks may not be compensated for investing their money in the business.
Drilling down the figures shows Union Bank Plc recorded negative retained earnings of N254.18 billion in September 2017, higher than the N244.18 billion recorded as at December 2016, according to data gathered by BusinessDay.
Unity Bank Plc’s accumulated losses stood at N273.64 billion in the period under review, a 0.54 percent reduction from the N275.14 billion deficits recorded as at December 2016.
Similarly, Wema Bank Plc recorded negative retained earnings of N36.44 billion in September 2017 compared to N39.18 billion deficits as at December 2016.
On the other hand, the Tier one lenders have the capital buffer to pay copious dividend, which means they are in a position to attract investors to their stocks.
Zenith Bank, Access Bank, GTBank, and UBA, had retained earnings increase by 41.92 percent, 31.92 percent, 40.17 percent and 14.73 percent to N312.67 billion, N113.92 billion, N126.54 billion and N159.04 billion.
Johnson Chukwu, managing director and CEO of Cowry Asset Management Limited said that the benefits to be paid by lenders to shareholders will be dependent on their financial health in terms of free cash-flow, robust reserves and solid liquidity position.
“We are not going to see benefit declaration the first quarter of the year,” said Chukwu.
Interest income on loans and advances and on short term government securities contributed to banks’ ability to use retained earnings to build capital.
Zenith, GTBank, UBA, Access, FBNH, Stanbic IBTC Holdings, Fidelity, and FCMB paid interim plus final dividend of N184.54 billion in 2017, which is 19.52 percent higher than 2016’s figure of N154.40 billion.
Ayodele Akinwumi head of research at FSDH Merchant Bank Limited says banks dividend yield could be lower because share price on which it is based has grown over 100 percent last year while rate of dividend growth has been between 20 percent and 30 percent.
“Banks dividend payments are tied to ratings they get from the central bank as it is a reduction in their capital,” Akinwumi said.
BALA AUGIE
