The Chairman of UBA Plc, Tony Elumelu explained why the Bank paid only 10kobo per share as dividend, following the release of its 2014 FY results. He was speaking at the bank’s annual general meeting(AGM) last week and explained that the bank’s dividend policy in the current financial year was guided by the need to be prudent.
“Though UBA is adequately capitalised with capital adequacy ratio in excess of regulatory requirement, we proactively raised additional capital during the year to further boost our capital base and it would not have been prudent to pay so much dividend after raising capital from the market. Shareholders should however expect higher dividend in future,”
The Capital Adequacy Ratio for Tier 1 banks which is put at 15% ensures the percentage of a bank’s qualified risk asset is not less than 15% of the bank’s loans and advances. For banks to keep lending aggressively, they will either have to shore up their capital to stay above this band or reduce lending. One way to shore up capital is to fund it from profits thus, paying out little dividend from profits declared for the year. UBA posted an earnings per share of N1.56 and paid just 6% of that amount as dividends.