By Kelechi Mgboji
Assistant Business Editor
Union Bank, Unity Bank, and Wema Bank reported N397 billion loss retained earnings in 2015, with the effect their shareholders earned no returns for their investment in 2015.
This amount represents an increase of N62 billion or 19 per cent compared to N334 billion retained deficits in 2014.
A sharp decline in profits recorded by banks last year spurred deficit retentions after the Central Bank of Nigeria (CBN) issued a guideline governing dividends payment.
In its circular, the CBN said before dividend is declared, reserve fund must be in excess of the paid-up share capital and transfer to the reserve fund a sum equal but not less than 15 per cent of the profit.
CBN Director (Banking Supervision), Tokunbo Martins, explained in a circular that no transfer shall be made until all identifiable losses have been made good.
Union Bank has the highest deficit in its retained earnings, as it rose slightly higher by a little above 1 per cent from N243 billion in 2014 to N244.9 billion 2015.
It had recorded a decline of 48 per cent in profit after tax to N14 billion in 2015 and failed to declare dividends since 2008.
Wema Bank in 2015 also maintained a deficit retained earning that rose 2 per cent to N35 billion as against N34.79 billion in 2014.
Unity Bank had a deficit retained earning at N117 billion in 2015 from N56 billion in 2014.
In their financial statements in 2015, Unity Bank and Wema Bank reported 56 per cent and 2 per cent respectively, eroding dividend payment to shareholders.
Analysts said investors in search of dividend stocks in the banks should look beyond these three banking stocks, regardless of their occasional price appreciations.
Union Bank Chief Financial Officer, Oyinkan Adewale, had blamed the CBN policy on retained earnings for not paying dividends to investors whom the bank had given hope of dividend payment after core investors recapitalised the rescued bank.
He said Union Bank has to abide by CBN guidelines on dividends payment, stressing that “the hard reality is that as long as we continue to have negative retained earnings, there is absolutely nothing Union Bank of Nigeria can do about paying dividends to its shareholders.
“We will keep on appealing to ownership of the company to understand that it is absolutely out of our hands.”
The General Secretary of Independent Shareholders Association of Nigeria (ISAN), Adebayo Adeleke, said: “Shareholders are sympathetically concerned about the bank’s inability to pay dividend over the past eight years.
“It goes to reinforce the fact that shareholders must be alive to the responsibility of holding corporate managers to high standards of good corporate governance.”
“The bank would turn the corners hopefully soon,” he enthused.
Wema Bank Chief Finance Officer, Tunde Mabawonku, recently said the bank is working on improving its negative retained earnings, which would enable dividend payment.
He disclosed at the annual general meeting in Lagos that “we are going to seek shareholders’ consent during the year once we get clearance from our regulators.
“We will call our shareholders to do some scheme of rearrangement to move some balance of negative retainers to share premium and until we do that the bank will not be in a position to pay dividend.”