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ETI shareholders reap windfall in 5 for 1 bonus



Ecobank Transnational plc (ETI) has introduced an innovation to rewarding investors as it offered the biggest reward in the banking industry in terms of bonus issue by offering shareholders five new shares for every one already held by them.


The reward is in addition to the dividend of N2.40 already declared by the bank.


Business Day gathered weekend that the bank would be reducing the nominal value of its shares from 12.5 US cents per share to 2.5 US cents per share by subdividing each ordinary share into five equal parts. This, according to analysts, implies that all existing shareholders will have six times more shares than they had initially because it is like declaring a bonus of one existing share for five new ones.


Before now, banks and other companies issuing bonuses are wont to capitalise their share premium accounts and offer such as fully paid-up shares to their shareholders.


Those who viewed the bonus as the biggest reward so far in the industry noted that the total shares outstanding in the name of the bank would still be about 59 percent of the average shares outstanding of Nigerian banks of 16 billion whereas ETI’s outstanding shares would be 6.5 billion.


Therefore, despite this huge bonus, ETI would also be in a position to give more bonuses in the future than any Nigerian bank.


Analysts who commented on the issue said: “With this split, ETI will be available to more shareholders rather than institutional investors.” Despite the share split, the shares still have an upside as the shares are expected to rally in coming weeks.


The bank is reputed as the only bank that has what it takes to be in the entire region in sub-Sahara Africa and could be a target of combination for offshore banks that want a foothold on Africa. The bank’s result for the 2007 financial year-end showed earnings of $107 million, while balance sheet growth was phenomenal with deposit growth leading the way by 89 percent. Deposits are the group’s core funding source and account for 72 percent of its funding base. With loan growth underperforming deposit growth, the group’s liquidity ratio improved to 66 percent, indicating that there is still plenty of balance sheet leverage potential.


Meanwhile, analysts say that the year 2007 marked a milestone for ETI as this was the first year Nigeria was the largest contributor to group profit before tax and assets.


They are of the view that with Nigeria contributing approximately 42 percent of PBT, ETI’s Nigerian business is finally reflective of the Nigerian economy and population to the regions in which ETI operates.


“Although Nigeria is finally contributing to the group, as one would expect, we do not believe this is the end of the Nigerian story; Nigeria should continue to expand its branch network extensively over the coming years.” According to the capital market experts, ETI would be stepping up a gear over the years even as they expect its Nigerian operations to be a key driver of growth over the next three years.


With 2007 equity to asset ratio of 7.8 percent, ETI is considered as an undercapitalised bank compared with other Europe’s emerging market banks with cross-cycle, equity-to-asset ratio of between 10 and 15 percent. To this end, analysts believe the bank could raise $636 million of additional capital in 2008.


However, it is believed that as more cash-rich Nigerian banks look to build pan-African footprints, ETI may become the prized assets within the sub-Sahara African banking system. - BusinessDay

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