Access Bank Plc disclosed in its 2016 half year results that it had set aside a total of about 517,753,801 ordinary shares of the bank as part of its employees share compensation scheme or share options.
According to the Bank’s 2016 half year results, under its Restricted Share Performance Plan (RSPP), “shares of the Bank are awarded to employees based on their performance at no cost to them. Under the terms of the plan, the shares vest over a 3-year period from the date of award. The scheme applies to only employees of the Bank that meet the stipulated performance criteria irrespective of where they work within the Group.”
The bank also reveals that it “sets aside an amount not exceeding five (5) per cent of the aggregate emoluments of the Bank’s employees in each financial year to purchase shares of the Bank from the floor of the Nigerian Stock Exchange for the purpose of the plan.”
The bank allocated an additional 318,927,997 to its shareholders during the year bringing the total allocation to about 517,753,801. The bank also disclosed that 42,599,105 have a vesting period that will expire in 2016, whilst 160,866,573 and 314,288,123 have vesting periods that will expire in 2017 and 2018 respectively.
According to this definition, vesting periods are defined as the period of time before shares are owned unconditionally by an employee in an employee stock option plan. If his/her employment terminates before this period ends, the company can buy back the shares at their original price.
For example, for the vesting period expiring in 2016, it means employees who have been allocated the shares will earn in by the end of the year provided that they remain as employees of the bank. They can leave the bank after the vesting period and still retain ownership of the shares.
At the current share price of N5.6 the shares are worth about N2.8 billion. The bank recognizes the average price of the shares at N5.95 based on when it purchased it. About 209.5 shares was purchased at about N7.5 while another 318.9 was purchased at about N4.8, 10.7 million was purchased at N6.4 naira per share.
Whilst banks are not allowed to buy back their shares, huge purchases like this are likely to have significant effect on the bank’s share price whenever it is carried out.