Implications Of CBN Directive On Dividend Payment By Banks- Cardinal Stone Research

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Implications for our coverage banks:

The CBN dividend policy assesses banks on their eligibility to pay dividends based on the capital adequacy ratio (CAR) and their non-performing loans (NPL). Below, we have analysed our coverage banks based on these metrics and highlighted how this policy will impact dividend payment for FY’17.

From the graph above, DIAMONDBNK as at 9M’17 is currently below the minimum capital adequacy ratio required for systemically important banks. If the trend persists into full year, DIAMONDBNK will not be eligible to pay any dividend. We highlight that ETI and FBNH are also close to the regulatory minimum but it is highly unlikely that these banks will breach this by FY’17 given that they are expected to capitalize their earnings after the full year audit – this is expected to strengthen CAR.


As at 9M’17, STANBIC, FIDELITYBK, DIAMONDBNK, ETI and FBNH are all above the minimum 5% threshold hence, if they are eligible to pay dividend it will be capped between 30% and 75% according to the rule stipulated above.

For DIAMONDBNK, the capital adequacy rule will prevent it from paying any dividends at all. FBNH is currently breaching the 10% NPL rule hence will not be able to pay dividend from its commercial banking business. However, the bank may pay dividends from the earnings of its other subsidiaries as it did in FY’16. FIDELITYBK and ETI fall within the threshold of 30% and 70% dividend payout band. The final probable payout will, however, depend on the level of their capital adequacy ratio when their full-year result is released. Nevertheless, FIDELITYBK three-year average dividend payout ratio is c.33% which is not materially different from the lower band of 30% should its CAR come in below the 300bps premium required to the regulatory minimum.


Figure 3: Verdict based on 9M’17 Earnings.

Cardinalstone Researc

 hhttp://investdata.com.ng/2018/02/implications-cbn-directive-dividend-payment-banks-cardinal-stone-research/#more

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