The twin benefits of dividends and bonus issues already declared by Zenith Bank Plc, United Bank for Africa Plc and Guaranty Trust Bank Plc for the year ended December 31, 2009, are unsettling the board of some other banks - forcing them to a rethink on the returns they will give to shareholders.
Following the banking reforms by the Central Bank of Nigeria (CBN), which led to huge provisioning by the banks, many investors had anticipated a zero dividend for the year ended December 31, 2009.However, three banks-Zenith Bank, UBA and GTBank, which have announced their audited results, surprised market operators and investors with the declaration of dividends and bonus shares.
Zenith Bank, which was the first to make its financial public declared a dividend of 45 kobo per share and a bonus of one new share for every four shares already held. UBA trailed with a dividend of 10 kobo and a bonus of one share for every five shares already held, while GTBank upped the game with a dividend of 75 kobo and a bonus of one for four shares.THISDAY checks revealed that these results are making the board of directors of the some of the banks that see the three banks as their rivals uncomfortable. It was gathered that one of the banks, whose Board had met outside the country and had thought of not giving dividend, had to reverse its decision after the first two banks announced their results.
“The bank, which is known for a regular dividend and bonus over the years, did not initially want to declare dividend in 2009 given its reduced profitability. But after Zenith Bank and UBA announced a twin benefit despite a decline in the profits, the Board had to consider towing the same line. Now the bank has made its dividend and bonus recommendations to the CBN and the approval is being awaited. But what I can tell you is that the dividend and bonus will not be as juicy as the past ones,” a competent market source said.
It was gathered that the smaller banks are more disturbed -wondering how investors would perceived them if they are unable to declare dividends for 2009.“It is really a thing of concern to some of the banks that are smaller in size because it has not been easy contending with shrinking income due to the lull that characterised the banking industry in later part of 2009 and now. But as you know, there is always the issue of ego among the banks.
They use some of these things as marketing tools and some of the banks are wondering how existing and potential customers including shareholders will perceive them if they fail to declare dividends.“Besides, some of the banks feel that poor results or zero dividends may affect their share prices that have witnessed some level of recovery at the stock market,” the source added. After suffering steep decline last year, bank's shares have been recovering since the beginning of this year. Apart from one bank has recorded negative growth as at last Friday, all others have enjoyed capital appreciation ranging between four per cent and 124 per cent.