Home | Goldstreet Business
Sunday, December 3, 2023
  • Home
  • General News
    • Extractives
    • Auto
  • Business
    • Banking and Finance
    • AgriBusiness
    • Insurance
    • Mining
    • Oil and Gas
    • Real Estate/Housing
  • News
    • Top Stories
    • Agriculture
    • Maritime/Aviation
    • Energy
    • Education
    • Construction
  • Technology
    • ICT
    • Telecom
  • World
    • Africa
    • International
  • Editorial/Features
  • GSB Data Services
No Result
View All Result
  • Home
  • General News
    • Extractives
    • Auto
  • Business
    • Banking and Finance
    • AgriBusiness
    • Insurance
    • Mining
    • Oil and Gas
    • Real Estate/Housing
  • News
    • Top Stories
    • Agriculture
    • Maritime/Aviation
    • Energy
    • Education
    • Construction
  • Technology
    • ICT
    • Telecom
  • World
    • Africa
    • International
  • Editorial/Features
  • GSB Data Services
No Result
View All Result
Gold Business Logo
No Result
View All Result

Banks forced to withhold dividends on 2O17 profits

May 4, 2018
in Uncategorized
0
Share on FacebookShare on Twitter

Caught between sheer need for new equity capital and the Bank of Ghana’s regulations as set out by the Banks & Specialized Deposit Taking Act [Act 93O], most commercial banks in Ghana are unable to declare dividends on their profits for the 2O17 financial year. This is coming at a time that banks are returning to their customary high profitability levels and the Ghana Stock Exchange, GSE, is enjoying its best performance in several years, and this is leaving most shareholders in bitter disappointment.

However, there is little the banks can do about the situation and indeed, majority institutional shareholders are empathizing with their smaller counterparts, comprising household retail equity investors in the main.

RELATED POSTS

MTN Ghana implements upward review of price of voice and data services

BoG to close down some distressed NBFIs

Most importantly, all the banks that have not yet complied fully with the new GHc4OO million minimum capital requirement, announced by the BoG last September and effective by the end of this year, are legally barred, by provisions in Act 93O – specifically section 35[1] – from distributing any part of their 2O17 profits as dividends to shareholders, unless they are given written approval by the central bank.

This is to ensure that those profits are used towards meeting the new minimum capital requirement ahead of the December 31 deadline. This is because only banks’ stated capital and the monies in their income surplus accounts – which comprise their retained profits from their operations – qualify as capital that is eligible for computing their compliance with the new minimum.

Approval to circumvent this clause will only be given if the BoG is certain that a recapitalization plan, presented by a bank and relying on an equity injection from outside the bank itself, will go through successfully.

So far, barely one third of the 34 licensed banks in Ghana have met the new minimum, even after adding on their after tax profits for 2O17. Although they can expect to make more profits this year, only profits computed from audited financial statements are accepted by the BoG for the minimum capital computations and the quarterly accounts released by the banks are usually unaudited management accounts, rather than audited accounts and so the profits declared are ineligible for the computations.

This means banks yet to meet the new minimum and which are relying on 2O18 first, second and third quarter profits to do so, would have to audit their quarterly accounts in order to enable those profits to be eligible ahead of the BoG’s deadline.

Beyond this regulatory constraint itself, the banks are only too well aware of the implications of paying dividends to shareholders out of profits direly needed to meet the new minimum capital requirement ahead of the deadline for compliance.

Resultantly, one bank after the other, has, over the past couple of weeks, been announcing that they will not pay dividends on their 2O18 profits, despite those profits generally being a marked improvement over those of the previous year.

In order to ameliorate shareholders disappointment, most of the banks affected are opting to issue them with bonus shares created out of the retained profits now being transferred into stated capital in order to comply with the new minimum capital requirement.

For instance, CAL Bank is asking shareholders to authorize the transfer of GHc171.6O million from its income surplus account to its stated capital, from which they are to approve an initial transfer of GHc78.32 million. Altogether, over the coming months, the bank plans to transfer GHc25O million in this manner adding it to the current stated capital of GHc1OO million. The balance of GHc5O million required to meet the new minimum capital requirement is to be obtained from profits made during 2O18.

Similarly, shareholders of Access Bank, have already approved a capital increase of GHc45O million, comprising a long term bond issuance of GHc15O million and a rights issue of shares to existing shareholders of GHc3OO million. Importantly, the bank’s largest shareholder, which is its parent bank, Access Bank Plc of Nigeria, has committed to injecting new equity capital during the first half of this year.

Currently, the bank has stated capital of GHc144.738 million and another GHc43.298 million in its income surplus account which means that pending the bond issue, the rights offer and the equity injection from its parent bank, the bank still needs more than GHc2OO million to meet the new minimum.

It is still unclear whether the bank intends to seek BoG approval to pay shareholders any dividends on the GHc29.592 million it made in after tax profits for 2O17, considering that many of them are retail investors who invested in the bank during its Initial Public Offer, IPO, a couple of years ago that resulted in its stock market listing.

A more peculiar situation is that of Fidelity Bank, which has announced a dividend of GHc O.7O per share on earnings per share of GHc3.58. This is despite its still having a capital shortfall; it currently has stated capital of GHc264.486 million and another GHc39.344 million in retained earnings held in its income surplus account.

The bank has announced plans to issue redeemable preference shares to the tune of GHc7O million. And it is transferring a further GHc2O million from its income surplus account to stated capital following  very strong profitability in 2O17, generated in part from loan loss recoveries after prudently making full provisions against possible losses facing it as the end of the previous year. Ostensibly, the BoG has thus given Fidelity the special dispensation required to allow it pay dividends despite its current capital shortfall, in the confidence that the bank is certain to bridge the gap imminently.

However, the handful of banks that have already met the new minimum capital requirement well ahead of the BoG’s deadline, have no such restrictions on dividend pay outs/ These include Ecobank, GCB Bank, Stanbic Bank and Zenith Bank among others and these now stand out as the most financially solid banks in Ghana, who can easily and conveniently afford to pay dividends to shareholders should they so wish.

Instructively however, these are the banks with the most conservative dividend policies, which is in part why they have been the first to cross the new capital threshold, having retained most of their earnings in the past rather than distributing them as dividends. Thus there is the possibility that despite being free to dish out their 2O17 profits as dividends, they will prefer to retain most of those earnings in order to become even stronger financially.

The restrictions on dividend payments will be a bitter pill for shareholders – especially retail, household equity investors who had been looking forward to an increase in their dividends following the significant improvements in profitability achieved last year. Returns on equity among most banks for 2O17 rose above 2O% again after dipping during the previous two years, but ongoing recapitalization requirements is making nothing of this for now as far as shareholders are concerned.

facebookShare on Facebook
TwitterTweet
ShareTweetShare

Related Posts

MTN Ghana implements upward review of price of voice and data services

MTN Ghana implements upward review of price of voice and data services

November 29, 2023
BoG to close down some distressed NBFIs

BoG to close down some distressed NBFIs

November 29, 2023
Ghanaian Youth Have a Role in Economic and Political Realms

Ghanaian Youth Have a Role in Economic and Political Realms

November 27, 2023

We are not engaged in a dubious deal – TOR management 

November 24, 2023
OSP orders TOR to suspend proposed partnership deal with Tema Energy Limited

OSP orders TOR to suspend proposed partnership deal with Tema Energy Limited

November 23, 2023
Next Post

19 businesses under 1D1F ready to go in Greater Accra

Strategic partner for home-based carrier looks promising – Aviation Minister

Archives

<
November 2023
  • November 2023
  • October 2023
  • September 2023
  • August 2023
  • July 2023
  • June 2023
  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
▼
>
MonTueWedThuFriSatSun
  12345
6789101112
13141516171819
20212223242526
27282930   
       
      1
2345678
9101112131415
16171819202122
23242526272829
3031     
    123
45678910
11121314151617
18192021222324
252627282930 
       
 123456
78910111213
14151617181920
21222324252627
28293031   
       
     12
3456789
10111213141516
17181920212223
24252627282930
31      
   1234
567891011
12131415161718
19202122232425
2627282930  
       
1234567
891011121314
15161718192021
22232425262728
293031    
       
     12
3456789
10111213141516
17181920212223
24252627282930
       
  12345
6789101112
13141516171819
20212223242526
2728293031  
       
  12345
6789101112
13141516171819
20212223242526
2728     
       
      1
2345678
9101112131415
16171819202122
23242526272829
3031     
   1234
567891011
12131415161718
19202122232425
262728293031 
       
 123456
78910111213
14151617181920
21222324252627
282930    
       
     12
3456789
10111213141516
17181920212223
24252627282930
31      
   1234
567891011
12131415161718
19202122232425
2627282930  
       
1234567
891011121314
15161718192021
22232425262728
293031    
       
    123
45678910
11121314151617
18192021222324
25262728293031
       
  12345
6789101112
13141516171819
20212223242526
27282930   
       
      1
2345678
9101112131415
16171819202122
23242526272829
3031     
    123
45678910
11121314151617
18192021222324
252627282930 
       
 123456
78910111213
14151617181920
21222324252627
28293031   
       
 123456
78910111213
14151617181920
21222324252627
28      
       
     12
3456789
10111213141516
17181920212223
24252627282930
31      
  12345
6789101112
13141516171819
20212223242526
2728293031  
       
1234567
891011121314
15161718192021
22232425262728
2930     
       
    123
45678910
11121314151617
18192021222324
25262728293031
       
  12345
6789101112
13141516171819
20212223242526
27282930   
       
      1
2345678
9101112131415
16171819202122
23242526272829
3031     
   1234
567891011
12131415161718
19202122232425
262728293031 
       
 123456
78910111213
14151617181920
21222324252627
282930    
       
     12
3456789
10111213141516
17181920212223
24252627282930
31      
   1234
567891011
12131415161718
19202122232425
2627282930  
       
1234567
891011121314
15161718192021
22232425262728
293031    
       
1234567
891011121314
15161718192021
22232425262728
       
       
    123
45678910
11121314151617
18192021222324
25262728293031
       
 123456
78910111213
14151617181920
21222324252627
28293031   
       
      1
2345678
9101112131415
16171819202122
23242526272829
30      
   1234
567891011
12131415161718
19202122232425
262728293031 
       
 123456
78910111213
14151617181920
21222324252627
282930    
       
     12
3456789
10111213141516
17181920212223
24252627282930
31      
  12345
6789101112
13141516171819
20212223242526
2728293031  
       
1234567
891011121314
15161718192021
22232425262728
2930     
       
    123
45678910
11121314151617
18192021222324
25262728293031
       
  12345
6789101112
13141516171819
20212223242526
27282930   
       
      1
2345678
9101112131415
16171819202122
23242526272829
3031     
     12
3456789
10111213141516
17181920212223
242526272829 
       
  12345
6789101112
13141516171819
20212223242526
2728293031  
       
      1
2345678
9101112131415
16171819202122
23242526272829
3031     
    123
45678910
11121314151617
18192021222324
252627282930 
       
 123456
78910111213
14151617181920
21222324252627
28293031   
       
      1
2345678
9101112131415
16171819202122
23242526272829
30      
   1234
567891011
12131415161718
19202122232425
262728293031 
       
1234567
891011121314
15161718192021
22232425262728
293031    
       
     12
3456789
10111213141516
17181920212223
24252627282930
       
  12345
6789101112
13141516171819
20212223242526
2728293031  
       
1234567
891011121314
15161718192021
22232425262728
2930     
       
    123
45678910
11121314151617
18192021222324
25262728293031
       
    123
45678910
11121314151617
18192021222324
25262728   
       
 123456
78910111213
14151617181920
21222324252627
28293031   
       
     12
3456789
10111213141516
17181920212223
24252627282930
31      
   1234
567891011
12131415161718
19202122232425
2627282930  
       
1234567
891011121314
15161718192021
22232425262728
293031    
       
     12
3456789
10111213141516
17181920212223
24252627282930
       
  12345
6789101112
13141516171819
20212223242526
2728293031  
       
      1
2345678
9101112131415
16171819202122
23242526272829
3031     
    123
45678910
11121314151617
18192021222324
252627282930 
       
 123456
78910111213
14151617181920
21222324252627
28293031   
       
      1
2345678
9101112131415
16171819202122
23242526272829
30      
   1234
567891011
12131415161718
19202122232425
262728293031 
       

RECOMMENDED

MTN Ghana implements upward review of price of voice and data services

MTN Ghana implements upward review of price of voice and data services

November 29, 2023
BoG to close down some distressed NBFIs

BoG to close down some distressed NBFIs

November 29, 2023

MOST VIEWED

Plugin Install : Popular Post Widget need JNews - View Counter to be installed
  • Energy
  • Health
  • Auto
  • International
  • Subscription Form
  • Staff Webmail
  • About Us
  • Contact Us
Call us: +233 24 432 0902 | info@goldstreetbusiness.com

© Copyright © 2020 goldstreetbusiness.com. All Rights Reserved.

No Result
View All Result
  • Homepages
    • Homepage Layout 1
    • Homepage Layout 2
  • World
  • Business
  • Technology
  • Health

© Copyright © 2020 goldstreetbusiness.com. All Rights Reserved.

Login to your account below

Forgotten Password?

Fill the forms bellow to register

All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In
This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.