Shareholders of Union Bank Plc have unanimously approved the proposed reduction of N54.4 billion from the bank’s share premium account. Nairametrics understands that this is in a bid to restructure the lender’s balance sheet for optimal performance.
The shareholders’ approval for the reduction of the bank’s share premium account follows a proposal by the lender’s board of directors. The shareholders endorsed the development during the bank’s Extraordinary General Meeting (EGM) which held in Lagos.
Highlighting the bank’s focus on delivering value to its shareholders, the Chairman of the company’s Board of Directors, Cyril Odu said;
“Union Bank is on course towards delivering its 2019-2021 strategic objectives. As we continue our push towards being Nigeria’s most reliable and trusted banking partner, we remain focused on improving the profitability of our business and delivering value to all our stakeholders – shareholders, customers, business partners, and employees.”
Why this matters: Losses incurred from legacy transactions have hindered Union Bank’s shareholders from getting dividends for a while. The N54.458 billion deficit revealed in the bank’s financial position for the 2018 financial year is an addition to the sum of N247.868 billion approved by shareholders in 2017. By implication, the current capital reduction move by the company will eliminate the major impediment which had been preventing the company from issuing dividends to its shareholders.
It should be recalled that despite a rise of 39% to N18.1 billion in its net profit in 2018, Union Bank could not declare dividends. This happened because the bank was affected by extant laws that forbid companies with retained deficits from declaring dividends.
Is this a smart move? It is pertinent to note that the deficit represents accumulated permanent losses from legacy transactions. In a bid to offset the negative retained earnings, the directors proposed the Share Premium Reduction in accordance with sections 106 and 107 of Companies and Allied Matters Act (CAMA).
Share Premium explained: Share premium represents the difference between the issue price of a stock and the par value of that stock. Share premium account houses the non-distributable reserves of a company and can be used to write off equity-related expenses and used to issue bonus shares.
About Union Bank Plc: Union Bank of Nigeria Plc provides investment, corporate, commercial, and retail banking products, and services for individuals, small and medium-sized companies, and corporations primarily in Nigeria and the United Kingdom.
The company traded N7 during the last trading session of the Nigerian Stock Exchange (NSE).