By Chinwendu Obienyi
As the race for banks’ recapitalisation heats up, commercial banks are showing their financial strength as plans are underway to distribute N412.33 billion worth of final dividends to their shareholders for the 2023 financial year, Daily Sun investigations can reveal.
This move is part of a broader trend of capital raising which has been gaining momentum within the Nigerian banking sector.
Furthermore, the dividend payment comes on the back of several approvals given by shareholders of the banks during several annual general meetings (AGMs)
These banks include; Access Holdings, FBN Holdings, FCMB, Fidelity Bank GTCO, Sterling Bank, UBA, and Zenith Bank.
According to financial reports of the banks obtained from the Nigerian Exchange Limited (NGX)’s website, Access Holdings had proposed a final dividend of N1.80 for ordinary share of 50 kobo to its shareholders for the reporting period.
At its AGM, shareholders gave their approval to the proposed dividend which means that they will be getting about N63.98 billion compared to N46.21 billion paid in the previous year.
Coupled with that as well, the bank shareholders approved the financial institution’s $1.5 billion capital raising programme as well as the N365 billion rights issue.
FBN Holdings also increased its dividend payout to their shareholders. Initially its AGM was to be held but got cancelled in the last minute owing to the resignation of Dr. Adesola Adeduntan as bank’s Managing Director. Nevertheless, the bank revealed that it would pay a final dividend of N14.35 billion and plans to raise about N300 billion capital to fulfill the CBN’s directive.
GTCO, UBA and Zenith Bank further increased their dividends to their shareholders (N94.18 billion, N78.7 billion and N125.59 billion, the highest so far by Zenith Bank).
Recently, Fidelity Bank has gained traction with its shares on the trading floor of the NGX after it launched its N127.10 billion capital raising programme, a programme Nneka Onyeali-Ikpe described as the pacesetter in the light of the banking industry’s recapitalisation drive. Also the bank stated that its shareholders approved its proposed final dividend of N19.2 billion.
Others include: Wema Bank (dividend payout and capital raise of N6.43 billion and N200 billion, respectively) and FCMB whose proposed capital raise stood at N150 billion while its dividend stood at N9.90 billion.
In total, the aforementioned eight banks will pay about N412.33 billion as dividend to their shareholders, which shows that the banks are healthy enough to pay dividends despite the harsh operating environment and recapitalisation directive from the CBN.
Although, analysts had projected a N4.2 trillion by the banks, it is set to surpass that projection as the 8 banks currently have about N4.0 trillion in total capital raise with more banks expecting to get more approvals from their shareholders.
An Ernst and Young report had already stated that 17 out of the 24 banks in the country may not meet the CBN directive which has led to financial experts cautioning that this significant outflow of funds may exert pressure on the economy.
“As at 2003-2004, there were some mergers that occured due to the capital raise by the CBN to N25 billion. A lot of things are looked at beginning from liquidity to how viable the bank is. Even though this exercise is expected to strengthen banks’ resolve, the injection of such a large sum into the market could have various implications, including potential inflationary effects and shifts in investment dynamics.
As banks raise capital and distribute substantial dividends, the economic landscape may experience notable changes, requiring careful monitoring and management”, Opeoluwa Taiwo
Executive Director, at Africa Bridge Initiative said.
For his part, the Managing Director, Afrinvest West Africa, Ike Chioke, stated that for there must be a deliberate effort to steer liquidity into the real sector in order to ensure banks avoid creating financial assets bubble or gains de-linked from productivity of the real sector.
He also said, “Regulatory supervision to strengthen risk management compliance and best practices is critical to disincentivize laxity and excessive risk-taking spurred by improvement in liquidity”.