A circular of the Central Bank of Nigeria (CBN) on dividend payout by commercial banks and discount houses has been analysed based on the performances and balance sheet positions of all lenders.
According to a report released on Monday, February 19, by Afrinvest West Africa, an investment and research firm, only six banks have met the apex bank’s minimum requirement for Capital Adequacy Ration (CAR) and Non-Performing Loans.
They are: Access Bank, Zenith Bank, Guaranty Trust Bank (GTB), First City Monument Bank (FCMB), Wema Bank and United Bank for Africa (UBA).
Hence these banks are excluded from the restrictions on dividend payment.
The Nation reports that the firm stressed that many lenders will not be able to pay dividends based on their capital reserves as well as the proportion of Non-Performing Loans (NPLs) in a bid to forestall any threats to customer deposits in the system.
On the criteria that require lenders to meet the minimum CAR before dividend payout, the research firm said all the banks under its coverage, save for Unity and Union, met the minimum requirement stipulated by the CBN.
“For Unity, the current CAR (as at nine month 2017) is unavailable while Union Bank had a CAR of 13.3 per cent (below CBN requirement of 15 per cent in first half of 2017). We envisage Union’s CAR will improve by fiscal year 2017, adjusting for the capital raise of N50 billion via rights issue in 2017,” it said.
On another requirement that banks and discount houses that have a Composite Risk Rating (CRR) of “High” or a Non-Performing Loan (NPL) ratio of above 10 per cent shall not be allowed to pay dividend, the report said only FBN Holdings has a non-performing loan ratio above 10 per cent which should disqualify the entity from paying dividend.
“However, given the Holding company structure operated by FBN Holdings, analysts believe dividend can be paid from earnings of subsidiaries, other than the bank,” it said.
It is understood that Diamond Bank, Fidelity Bank, Stanbic IBTC, Sterling and Union Bank are restricted to a maximum of 30% maximum payout ratio, with respective NPL ratio above five per cent but below 10%.