Shareholders of Wema, two others to miss 2015 dividends.


The impressive run by Wema Bank Plc at the end of the third quarter will not guarantee dividends to its shareholders when the 2015 financial year draw to a close.

Others in this category are Unity Bank and Union Bank of Africa.

Union Bank of Africa recorded15.5 per cent or N9.3 billion growth in profit after tax, its shareholders are to end the financial year with no dividends owing to the management’s is plan to recover from past losses that had push the bank to the grass.

Interestingly, the bank was able to reduce its loss retained earnings to N249.67 billion as at September 2015 from N269.79 billion of the previous year.

Other financial institutions with loss retained earnings include Wema Bank Plc with N33.88 billion while that of Unity Bank loss retained earning stood at N47 billion as at September 2015 from N56 billion of December 2014.

The Central Bank of Nigeria (CBN) stated that before any dividend is declared, reserve fund must be in excess of the paid-up share capital and transfer to the reserve fund a sum equal to but not less than 15 per cent of the net profit.

CBN Director of Banking Supervision Department of CBN, Tokunbo Martins, in circular with a reference number BSD/DIR/GEN/LAB/07/033, further explained that no transfer under this subsection shall be made until all identifiable losses have been made good.

Market analysts are of the opinion that shareholders looking for dividend stocks to play in the banking sub-sector should stay clear of these three banks, regardless of their price appreciation.

However, they said the fact that they are making profit shows that they are well-managed and gradually coming out their negative position.

“We should commend the management of these banks, most especially Wema Bank where Segun Oloketunyi is the leader as they have done well to improve the position of the bank”, Akintunde Opeyemi, a shareholders said.

He added that efforts being made to recover debts by the Unity Bank management is another factor that shows that it is working hard to turn around the bank.

The banking industry’s non-performing loans are on the increase as a result of banks’ facilities to the energy sector of the economy including power, oil and gas sectors.

Since the recapitalisation of the banking sector in 2004 that led many banks into merger and acquisition, many banks’ performance in terms of price and earnings has been very unstable regardless of reforms to improve the sector by former CBN governor, Sanusi Lamido.

Unity Bank, though for the first time, regained its position in 2014, has recorded improved profit and loss figures as well as stronger balance sheet.

The bank has been foot-dragging with changes in management and over-bloated shares despite the reconstruction of its right issue and private placement.

With respect to the anticipated increase in the non-performing loans of the bank, earnings movements in the 2014 financial year were not impressive for the management to recommend dividend.

It is important to note that Union Bank has denied investors dividend for more than four years now due to the bank’s negative retained earnings.

The recapitalisation of the bank to reposition its operation has not pulled it out of the red position.  The restructuring currently ongoing in the bank is not expected to bring positive result now as it will take time for total turn around.

Shareholders looking for dividend stock in the financial service sector of the market should look away from UBN too as it is not clear when the lender will recover from negative retained earnings.

Regardless of the prolonged weak performance, Wema Bank has relatively remained stable as the bank moved from its red position to profitability with improved profit in the last two years.

Recently, Wema Bank was granted National license by CBN. The bank had an existing shareholders funds for the period at N44billion; significantly higher than the N25billion shareholders funds required for National Banks, hence the request by Wema Bank to apply for the license.

The Bank’s decision to go National is largely driven by series of opportunities in the sector.

In a statement, the bank noted that, “Our approach to the implementation of a national banking expansion will be a phased roll-out of branches. First, we will quickly open branches in locations where we already have existing infrastructure and captive business to ensure we take immediate advantage of the latent business opportunities in these locations. Subsequently, we will take a cautious approach to expansion and only deploy resources to areas that have been assessed as commercially viable.

“Going by the encouraging and growing level of electronic banking penetration in the country, our new branch builds will be very cost effective as the space required to serve will continue to get relatively smaller as it obtains today in more advanced financial systems.

“The Bank requires additional capital largely to grow its business in the new year and to also provide additional buffer to cushion against economic shocks,” the statement added.

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