Ecobank Transnational Incorporated (ETI) is ploughing back into liquidity its entire N65.7 billion profit made in 2014.
The bank has proposed bonus shares of one new share for every 15 already held, to appease holders of the stock currently trading at about N20 per share on the Nigerian Stock Exchange (NSE).
The one for 15 bonus share, if approved by the shareholders at the annual general meeting (AGM) in Tanzania, will translate to less than 10 kobo per share.
But the shareholders are kicking against the proposed return on investment saying it is short of expectations, particularly from a bank that reconstructed shares capitalisation after the acquisition of Oceanic Bank that short-changed the shareholders of Oceanic.
Progressive Shareholders Association of Nigeria (PSAN) President, Boniface Okezie, described it as the worst return on equity in recent years, and called on regulators to protect the interest of shareholders.
Said he: “With this result coming from ETI, all is not well with the bank. This one for 15 bonus to shareholders translates to about 10 kobo per share. That is too poor for a bank flaunting a pan African outlook.
“After shares reconstruction that took away people’s shares, they are now given next to nothing to shareholders as return on investment. Shareholders were short-changed in the first instance, and now they are paying them miserable returns.
“With what they have given as returns, the stock is over-priced at N20 per share. The market should allow the stock to find its proper price valuation to reflect the reality on the ground.
“We have seen the fat salaries running into millions of dollars being paid to the directors of the bank which is not justifiable.”
Okezie accused Ecobank of planning to shut out Nigerian shareholders from its AGM by moving the venue from Togo to Tanzania.
“They know what they are doing by moving the venue to Tanzania. The bank has operated in breach of corporate governance codes; it has not been running transparently.
“The management are trying to shield themselves from shareholders’ heat.”
He alleged that the regulators, the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC), have not done enough to protect Nigerian minority shareholders of the bank from the tyranny of majority shareholders.
To him, this was the reason things went bad with the nationalised banks, only for the CBN to turn around and blame shareholders.
Olufemi Timothy, another shareholder activist, also condemned Ecobank and blamed the CBN and the SEC for not protecting local investors, a reason local investors have developed apathy to the capital market.
Timothy expressed concern over what may become of Ecobank in the future.
“The stability, profitability, and the future of the bank is the most important issue now. This should worry every stakeholder,” he said.
“The bank has issues in the court concerning their former managing director that was fined and sacked. It is not the best time for the bank. That said, what shareholders need is enhanced cash dividend, and not miserable one for 15 bonus share.
“We know the situation in the capital market. Investors are not buying shares. So why increase my share capital when you know that I cannot sell it, let alone sell at a good price?
“These are some of the reasons why the market may never recover in the near future. Local investors have been cheated by companies quoted on the NSE, and the regulators look the other way.
“How will they come back to the market? It is quite unfortunate.”
Last year, ETI recorded N65.7 billion profit, 144 per cent above N23.57 billion made in 2013, but it has decided to hold back all profit to shore up liquidity.
The audited financial result also showed 134 per cent increase in profit before tax from N35.37 in 2013 billion to N86.4 billion in 2014. Revenue rose 14 per cent to N379.3 billion, against N319.56 billion.
Total assets grew 25 per cent to N4.5 trillion from N3.6 trillion in 2013; total equity rose 45 per cent to N493 billion compared with N341 billion in 2013.
ETI Group Chief Executive Officer, Albert Essien disclosed that “we grew customer loans by $890 million or 8 per cent, and deposits by $947 million or 6 per cent, particularly in core current account deposits, despite the adverse impact of United States dollar’s appreciation to our key functional currencies.”
With loan-to-deposit ratio over 90 per cent, liquidity ratio on December 31, 2014 was at a grave level which was partly why Ecobank decided to reinvest the entire profit.
It had cut cost earlier in the year, which saw the sack of over 500 employees and the closure of branches with huge liabilities relative to earnings prospects.
