Connect with us
nairametrics
UBA ads

Business News

Why shareholders of Nigerian banks should expect lesser dividend payouts in 2020

“Some companies (banks) have already begun to slash their CAPEX and will most likely cut dividend payouts in 2020.”

Published

on

Dividend

Between 2018 and 2019, quoted Nigerian banks paid out a total of N538.1 billion as dividends to their shareholders. In 2019 alone, the total dividends paid by these banks stood at N277.9 billion, according to checks by Nairametrics Research.

Interestingly, even though the banking index of the Nigerian Stock Exchange has been one of the most-liquid and best-performing indexes so far in 2020, there are strong indications that many bank shareholders will receive lesser or no dividends in 2020. This is because of the recent economic challenges occasioned by the Coronavirus pandemic.

UBA ADS

See the listed banks

There are thirteen commercial banks that are listed on the Nigerian Stock Exchange. These are all familiar names, including the tier-1 banks – FBN Holdings Plc, United Bank for Africa Plc, Guaranty Trust Bank Plc, Access Bank Plc, and Zenith Bank Plc. Others are Ecobank Transnational Incorporated, Fidelity Bank Plc, Stanbic IBTC Holding Plc, Union Bank of Nigeria Plc, Sterling Bank Plc, FCMB Group Plc, Wema Bank Plc, and Jaiz Bank Plc.

(READ THIS: Nigeria gets $3.4 billion disbursement from IMF, interest rate 1%)

Let’s compare the stats

A brief comparison of the total dividends paid by the banks in 2018 and 2019 showed that Zenith Bank doled out the highest amounts of N86.3 billion and N87.9 billion. This is followed by Guaranty Trust Bank which paid out N79.4 billion worth of dividends in 2018, and then N81 billion in 2019.

GTBank 728 x 90

UBA paid out N29 billion worth of dividends in both 2018 and 2019, while Access Bank paid N18.8 billion and N23.1 billion in 2018 and 2019, respectively. On the other hand, FBN Holdings Plc (which is the parent company of First Bank of Nigeria Ltd), paid out N10 billion in 2018 and N10.7 billion in 2019.

Based on the foregoing, we can see a clear pattern whereby the top banks were the ones paying out the highest dividends. Coincidentally, these tier-1 banks reported the biggest profits during the periods under review. A closer analysis also proved what most investors should already know, and that is the fact that the more profitable a company is, the bigger the dividends its shareholders are entitled. For instance, Zenith Bank and Guaranty Trust Bank (respectively) reported the highest and second-highest profits in 2018 and 2019.

 

Deal book 300 x 250
onebank728 x 90

How much dividend the rest of the banks paid

Note that Nigeria’s tier-1 banks were responsible for 94.6% and 89.3% of the total dividend payouts by NSE-listed banks between 2018 and 2019, respectively. The dividend payouts by the other banks can be seen below.

Possible dividend draught in 2020

As earlier mentioned, there are strong indications that some banks may resort to paying lesser or no dividends at all in 2020. This is due to the economic fallouts from the Coronavirus pandemic, which has triggered a recession in Nigeria. There are also other macroeconomic factors that might be responsible for this, as we shall see shortly.

app
GTBank 728 x 90

Recall that Nairametrics recently reported about Augusto & Co’s latest assessment on Nigerian banks, which basically noted that COVID-19 has weakened the asset quality of the banks. According to the ratings agency, Nigerian banks are significantly exposed to several sectors, including the oil and gas sector, manufacturing, real estate, public sector, construction, and general commerce.

A related report by Augusto & Co also noted that Nigerian banks’ earnings and profitability are expected to decline drastically in 2020. In specific terms, banks’ earnings from their core business are projected to decline in the short term due to an expected rise in impairment charges and lower yields on their loan books. More so, the contractionary monetary policy stance, exacerbated by discretionary Cash Reserve Requirement (CRR) debits by the CBN, is expected to affect banks’ overall performance this year.

(READ FURTHER: Analysis: A better way to price Guinness shares)

Agreed, the Q1 2020 results so far released by the banks show generally positive performances. However, it must be noted that earnings reports were for the first three months of the year, shortly before the Coronavirus hit Nigeria hard. Subsequent quarterly results are projected to reflect the adverse effect of the pandemic in the form of lesser earnings/profitability. And as you may well know, companies find it difficult to pay dividends when their profits are low.

Cutting down on expenses in order to survive

Earlier this week, Nairametrics quoted Lanre Buluro of Chapel Hill Denham as saying that “…some companies (banks) have already begun to slash their CAPEX and will most likely cut dividend payouts in 2020.”

app

 

Nigerian Banks,Impact of coronavirus pandemic on asset quality of Nigerian banks

Patricia

Emmanuel covers the financial services sector for Nairametrics. Do you have a scoop for him? Well then, contact him via his email- [email protected]

1 Comment

1 Comment

  1. Adeola Tosin Adeoti

    May 6, 2020 at 2:06 pm

    Of course, these are hard times for everyone, including the banks, so shareholders should be ready for a downtime.

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Around the World

Shell considers relocating its headquarters to the UK

Royal Dutch Shell has consistently pushed for the Dutch Government to stop taxes on dividends.

Published

on

GLOBAL GAS vs SHELL: COURT SETS ASIDE AWARD OVER BREACH OF CONTRACT, Investors, shareholders shocked as Shell reduces dividend

Oil and gas giant, the Royal Dutch Shell, is considering moving its corporate headquarters from The Netherlands to Britain. This could be a move against the implementation of dividend tax in The Netherlands.

The move was disclosed by the oil company’s Chief Executive Officer, Ben Van Beurden, during an interview with a Dutch newspaper on Saturday, July 4, 2020. According to him, the oil giant is not ruling out relocating its headquarters from the Netherlands to Britain. He said:

UBA ADS

You always need to keep thinking. Nothing is permanent and of course we will look at the business climate. But moving your headquarters is not a trivial measure. You cannot think too lightly about that.”

Further confirming the Chief Executive Officer’s comment, a Shell spokesman told Reuters that the oil giant is looking at ways to simplify its dual structure, as it had been doing for many years.

Royal Dutch Shell has consistently pushed for the Dutch Government to stop the tax on dividend paid to shareholders, as this makes financing dividend, share buy-backs and acquisition a lot more difficult.

GTBank 728 x 90

An earlier attempt by the Dutch Government to stop the dividend tax as an incentive to convince Unilever to unify its dual structure in Rotterdam, was met with an outcry by the public, who see that as a gift to rich foreigners.

It can be recalled that Shell had announced a few days ago that it might likely write down between $15 billion-$22 billion in post impairment charges for the second quarter of 2020. The impairment, which is its largest since the merger with Shell Transport and Trading Company Ltd in 2005, shows the huge adverse impact that the coronavirus pandemic has had on the oil giant’s businesses.

Also, in a move that shocked investors, Shell for the first time since the Second World War, cut down the dividend that it paid to its shareholders by two-thirds due to the negative impact of the pandemic. The decision came as a surprise to many including shareholders of the oil company which is by far the biggest payer of dividend in the FTSE 100.

onebank728 x 90

Patricia
Continue Reading

Coronavirus

Governor David Umahi of Ebonyi tests positive for COVID-19

Umahi has directed those who worked in the budget review for 2020 to immediately test for COVID-19.

Published

on

David Umahi, Ebonyi State workers will not get salaries for this reason

The Governor of Ebonyi State, David Umahi has tested positive for COVID-19, reported on Saturday afternoon.

Umahi’s Special Assistant on Media, Mr. Francis Nwaze, confirmed the news and also revealed that some associates of the governor also tested positive.

UBA ADS

He also said that the Governor is not showing any symptoms of the disease, though he has isolated himself in line with the NCDC protocols.

“The governor has directed his Deputy, Dr Kelechi, to coordinate the state’s fight against the disease and appealed to the citizens to take the NCDC protocols seriously.

READ MORE: Governors may push for 42% of federal allocation in new sharing formula

GTBank 728 x 90

“He will currently be working from ‘home’ and will be conducting all meetings virtually,” Nwaze added.

David Umahi becomes the sixth Nigerian governor to test positive for the disease, Governors of Kaduna, El- Rufai, Bauchi, Bala Mohammed and Oyo, Seyi Makinde have fully recovered while the recent cases have been the Governors of Ondo, Rotimi Akeredolu and Delta, Ifeanyi Okowa.

On Thursday, Governor Umahi announced that the state’s Executive Council was finalizing the budget review required by World Bank and said “most us broke down and are being treated of malaria.”

onebank728 x 90

Download the Nairametrics News App

He also directed those who worked in the budget review for 2020 to immediately test for COVID-19 and admitted he is expecting a second test result after he initially tested negative in March.

app
GTBank 728 x 90
Patricia
Continue Reading

Economy & Politics

Nigeria’s debt rises to $79.5 billion, as debt to revenue ratio worsens

According to data obtained from DMO, $27.66 billion (N9.9 trillion) is the total external debt.

Published

on

Nigeria's Debt to revenue ratio, DMO suspends April 2020 FGN savings bond offer

Nigeria, Africa’s largest economy’s total public debt rose to $79.5 billion (N28.63 trillion) as of the first quarter of 2020, which is March 31, 2020. This represents a 15% increase from the figure that was recorded for the corresponding period in 2019, which was about $69.09 billion (N24.94 trillion).

This was disclosed in a latest publication by the Debt Management Office (DMO) on Friday June 3, 2020.

UBA ADS

Nigeria has seen its debt stock rise sharply in recent years as the country tries to fund infrastructural and developmental projects and boost its fragile economy, which has been in and out of recession. The country’s economy has been projected to fall into recession again, due to the adverse impact of COVID-19 that has seen oil prices crash globally.

According to data obtained from DMO, $27.66 billion (N9.9 trillion) is the total external debt. This represents 34.89% of the total public debt stock. Whereas, $51.64 billion (N18.64 trillion) is the total domestic debt, which represents 65.11% of the total public debt.

READ MORE: Nigeria borrows N754 billion in 3-month, total debt now N25.7 trillion  

GTBank 728 x 90

The Federal Government accounts for 50.77% of the total domestic debt, which is $40.26 billion (N14.53 trillion), whereas the State Governments and Federal Capital Territory account for 14.34% of the total domestic borrowing which is $11.37 billion (N4.11 trillion).

Nigeria has been under a lot of fiscal crisis following the crash of oil prices triggered by the coronavirus pandemic. The oil sector accounts for about 90% of the country’s foreign exchange earnings and about 60% of its total revenue.

The country, which had lined up a series of debt issue this year, had to halt the external commercial borrowing due to oil price collapse. The Minister for Finance, Zainab Ahmed, had last week disclosed that the country would no longer go ahead with its Eurobond debt issue.

onebank728 x 90

READ ALSO: Lagos debt hits N39.6 billion, to borrow N97 billion more

The Nigerian government, for now, is focusing on the domestic markets and concessionary loans to help fund the 2020 budget deficit which is made worse by drop in revenue. In the recently approved 2020 revised budget, the federal government is expected to borrow N850 billion from the domestic market.

This rising debt has put a lot of pressure on the government’s resources as it spent $1.69 billion (N609,13 billion) to service its domestic debt in the first quarter of 2020 alone.

app
GTBank 728 x 90

Nairametrics had reported that Nigeria’s global rating is at risk due to the sharp rise in the country’s sovereign debt and a growing finance gap. According to a report from the global rating agency, Fitch Ratings, this could trigger a rating downgrade as policymakers struggle to stimulate growth and deal with the impact of low oil prices and sharp drop in revenue.

Download the Nairametrics News App

According to Fitch, the country’s debt to revenue ration is set to deteriorate further to 538% by the end of 2020, from the 348% that it was a year earlier.

Patricia
Continue Reading