Home Business First Bank Cuts Dividends to Meet BASEL 2 Capital Requirement

First Bank Cuts Dividends to Meet BASEL 2 Capital Requirement


First Bank of Nigeria Holdings Plc (FBNH) has said the 10 kobo dividend proposed for their shareholders is a plan for the company to retain capital to meet the Basel 2 capital requirement.

The Group Managing Director of FBNH, Mr. Bello Machido, stated this at the Banks Facts Behind The Figures’ presentation held at the Nigerian Stock Exchange (NSE).

In his presentation, Machido said the Board of FBNH had proposed a 10 kobo dividend and a scrip bonus issue of one share for every 10 shares held to the shareholders in the year ended 2014.

He said the group had no plans to raise Tier 2 capital within the next 12 months to beef up its Capital Adequacy Ratio (CAR) since its CAR still stands at 16.7 percent which is above the 15 percent Basel 2 requirement.

He said the group has been able to achieve that by striking a balance between dividend payout and profit retention as well as more efficient balance sheet management and more conservative loan growth.

The Group CEO said the CBN made it compulsory for all banks that did not meet up with the 15 percent CAR to submit their application on how to raise their capital through the Basel 2 requirement.

He said the group have enough CAR and even above the regulatory requirement of 15 percent.

Machido also said the bank would be diversifying its commercial banking business in a way that would enhance the banking business in different categories.

Speaking on the rationalisation of branches and staff of the bank, he said in order to sustain efficiency of the group, FBNH is planning to rationalise unprofitable and minimum expansion.

He also announced an operational loss of N64 billion in 2014 due to regulatory headwinds by CBN.

Regulatory headwinds are measures introduced by CBN and monetary policy committee to manage the macroeconomic situation in the country, such as inflation and liquidity in the system.

He said the company lost N64 billion to the increase in CRR for both public and private sector to 75 percent and 20 percent respectively by the CBN.

Speaking on the issue of rationalisation of some unprofitable branches, the Group Managing Director of First Bank Nigeria Ltd, Mr. Bisi Onasanya, said in spite of all the challenges in the country, the bank has over 700 branches across the country and cannot afford to keep the ones, which are not viable and profitable.

He said, however, that the bank would not lay off any of its staff, explaining, “I promised that that no staff of the bank would lose their job as a result of the rationalisation we are going to embark upon”.

The bank full year results for the period ended December 2014 showed a profit after tax of N82.8 billion, an increase of 17.3 percent compared to N70.6 billion recorded in the same period of 2013.


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