Business News
Fidelity Bank’s shareholders approve proposed dividend for FY 2018
Following recommendation by board of directors, Fidelity Bank Plc’s shareholders have unanimously approved a dividend of N3.2 billion for FY 2018.
Fidelity Bank Plc‘s shareholders have unanimously approved the payment of a total dividend of N3.19 billion proposed by the board of directors for the financial year ended Monday, December 31, 2018.
Nairametrics understands that the total dividend translates to 11 kobo per shares and was approved by the shareholders at the bank’s 31st annual general meeting (AGM) which took place in Lagos over the weekend.
The company’s commendable FY 2018 results
Gross earnings – Gross earnings for the year increased to N188.87 billion from N180.24 billion declared in 2017 financial year end, indicating a 4.8 percent increase.
Profit Before Tax – The notice further showed that the bank’s Profit before tax (PBT) rose to N25.08 billion from N19.21 billion posted in 2017, representing 30.6 percent increase.
Profit After Tax – Profit after tax (PAT) grew by 29 percent to N22.93 billion for the period ended December 31, 2018, when compared to N17.77 billion recorded in 2017.
Understanding Dividend
A dividend is a payment made by a company to its shareholders, usually as a distribution of profits. When a company earns a profit or surplus, it reinvests a portion of the profit in the business (retained earnings) whilst paying a portion as dividends to the shareholders.
Distribution to shareholders may be in cash (usually a deposit into a bank account) or the issuance of further shares, otherwise known as shares repurchase. But this is usually if the company has a dividend reinvestment plan.
In other words, a dividend is allocated as a fixed amount per share with shareholders receiving a dividend in proportion to their shareholding. For the joint-stock company, paying dividends is not an expense; rather, it is the division of after-tax profits among shareholders.
About Fidelity Bank Plc
Fidelity Bank Plc began operation in 1988 as Fidelity Union Merchant Bank Limited. By 1999, it converted to a commercial bank and changed its name to Fidelity Bank Plc. It became a universal bank in February 2001, with a license to offer the entire spectrum of commercial, consumer, corporate, and investment banking services.
The company’s shares are currently trading at N1.94 on the floor of the Nigerian Stock Exchange (NSE).
Business News
IMF advises banks to suspend dividend payment
However, halting dividend payments may not go down well for many retail and institutional investors, who rely on bank dividends for regular income.
In an article published on its website, International Monetary Fund (IMF) Managing Director, Kristalina Georgieva, advised banks to halt dividend payment for now. According to her, with the expectation of a deep recession in 2020 and partial recovery in 2021, banks’ resilience will be tested. Therefore, having in place strong capital and liquidity positions to support fresh credit will be essential.
According to the article, one of the steps needed to reinforce bank buffers is retaining earnings from ongoing operations which are not insignificant.
IMF staff calculate that the 30 global systemically important banks distributed about US$250bn in dividends and share buybacks last year.
In a circular dated January 31, 2018, the Central Bank of Nigeria (CBN) stipulated new conditions for eligibility of Nigerian banks to pay dividend and the quantum of dividend to be paid out by banks who are eligible. Prior to the release of the circular, dividend payout policy for Nigerian banks had been spelt out in Section 16(1) of BOFIA 2004 (as amended) and Prudential Guidelines for DMBs of 2010. The circular provided guidelines and restrictions around divdidend payout for banks based on NPL ratio, CRR levels, and Capital Adequacy Ratio (CAR).
However, there were no regulatory restriction on dividend payout for banks that meet the minimum capital adequacy ratio, have a CRR of “low” or “moderate” and an NPL ratio of not more than 5%. However, it is expected that the Board of such institutions will recommend payouts based on effective risk assessment and economic realities. Indeed, current economic realities demand caution.
Current economic realities mean that banks face asset quality threats, further devaluation threat which may impact capital in some cases, and lower profits which in turn affects the quantum of capital retained. Ideally, these should reflect in NPL ratio and CAR ratio and should immediately restrict banks’ ability to pay dividend. However, there is usually a time lag before these ratios begin to reflect the new economic realities. Therefore, IMF’s advise may come in handy for many banks.
(READ MORE: Software security limitations cited as major reason for Covid-19 bank rush)
That said, halting dividend payments may not go down well for many retail and institutional investors, who rely on bank dividends for regular income. Banks like Zenith and Guaranty Trust have a good history of consistent dividend payment with attractive yields which is a major attraction for many shareholders.
CSL STOCKBROKERS LIMITED CSL Stockbrokers,
Member of the Nigerian Stock Exchange,
First City Plaza, 44 Marina,
PO Box 9117,
Lagos State,
NIGERIA.
Economy & Politics
CBN reduces MPR to 12.50%, holds other metrics
Central Bank of Nigeria (CBN) has reduced the Monetary Policy Rate (MPR) from 13.50% to 12.50% and retains CRR at 27.5%, Liquidity ratio at 30%.
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has reduced the Monetary Policy Rate (MPR) from 13.50% to 12.50%.
Governor, CBN, Godwin Emefiele, disclosed this while reading the communique at the end of the MPC meeting on Thursday in Abuja. Meanwhile, other parameters such as the Cash Reserve Ratio (CRR) remained at 27.5%, Liquidity ratio at 30%.
Highlights of the Committee’s decision
- MPC cuts MPR by 100 basis points to 12.50%
- CRR stood at 27.5%
- The Liquidity Ratio was also kept at 30%
CBN MPC cuts policy rate by 100 basis points to 12.5 %, maintains other parameters constant.
— Central Bank of Nigeria (@cenbank) May 28, 2020
According to Emefiele, the decision of the MPC to reduce the Monetary Policy Rate was informed by the impact of the Covid-19 pandemic on the economy, increased inflationary pressure, restrictions in international trade and more.
He highlighted the decline in the nation’s GDP as well as the decline in the manufacturing and non-manufacturing purchasing index which were attributable to slower growth in production, rate of unemployment, amongst others.
Economy & Politics
Just in: Buhari seeks approval from green chamber to borrow fresh $5.5billion
FG also seek approval for the revised 2020-2022 mid-term expenditure framework (MTEF) which became necessary as a result of the crash in crude oil prices and the cut in the production output.
President Muhammadu Buhari is seeking the approval of the House of Representatives to borrow fund to finance capital projects at the federal and state (to support state governors) levels in the 2020 budget.
This request was disclosed via the official twitter handle of the House of Representatives.
The president’s letter, which indicated that the fund would be sourced locally and internationally, was read on the floor of the House of Representatives by the Speaker, Femi Gbajabiamila, during plenary on Thursday, May 28, 2020.
In the letter to the lower chamber, Buhari, is also seeking the approval for the revised 2020-2022 mid-term expenditure framework (MTEF) which became necessary as a result of the crash in crude oil prices and the cut in the production output.
Although the tweet did not contain the total amount of loan that is being requested, reports suggests that the President is seeking approval to borrow the sum of $5.513 billion from external sources to finance 2020 budget deficit and support state governments to meet challenges caused by the coronavirus pandemic.
President @Mbuhari is also seeking the House approval to borrow locally & internationally to finance capital projects as well as finance projects to support state governors in the 2020 budget
The letter was referred to the House Committee on loans & debt management. #HousePlenary— House of Reps NGR (@HouseNGR) May 28, 2020
Details shortly…
