Banks’ Provisioning for Bad Debts Will Affect Dividends
- By Business World
- Published October 19th, 2009
- Back Page
- Unrated
NO doubt, every investor heaved a sigh of relief as the banking reform came to a close penultimate week. They beheld with joy as prices inched up. The assurance by the past central bank governor, Prof Chukwuma Soludo that “no bank in Nigeria shall collapse”, has unwittingly played itself out. “The enormity of what would have happened come December 2009, necessitated the action of the new governor, Lamido Sanusi” one observer noted. It would really have been our own meltdown. Brazenly, banks, which would have been negatively affected by the interbank borrowing process would have simply had no funds to meet their customer obligations. The effect would have been a sever recession.
As an analyst, Mr Abel Ariwodo of Able Rock Investment Limited, puts it, “We simply would have woken up to find out that banks have shut their doors to customers as is the case with some microfinance banks; not necessarily because of their own mismanagement but that of the other banks. And we would have done nothing but rue over our loss for a time and move on”.
As the case is now, nothing is more agonizing than having your assets depleted in value as the stock market has done to investors. But John Ogbuji, an investor, said, he wants to recoup some of his losses by buying cheap now and sell at a later date.
Ogbuji’s strategy is to forget the past and start afresh. We will also recommend this strategy to our numerous readers as they invest now for price appreciation rather than dividend or bonus. The price appreciation will come as companies release impressive quarterly result and audited ones.
Having looked at the scenario, we advise our loyal readers to look the way of these stocks that could show price appreciation.
Fidelity Bank Plc
Since the listing of this bank on the exchange on May 17, 2005, it has regularly and consistently been providing the investing public with its quarterly and audited financial report for them to see and judge. This promptness of the bank, has endeared it to its shareholders. Moreover, it has progressively bettered its quarterly and yearly reports. The bank specializes in retail banking but its brand is creatively different from the normal retail banking that abounds here and there. Creative in the sense that even with its huge outstanding number of shares, 28.9billion, it still makes profit and pays dividend to its shareholders. The historical data of this bank shows that, even though it is not “loud”, it has been rewarding consistently its shareholders in the last four years. Its EPS has always been upwards. The EPS has been grown steadily by 62 per cent in the last four years.
As a matter of facts and figures, this bank has in this year 2009, grown its average quarterly earnings by 87 per cent. After it recorded first quarter EPS of 12kobo, second quarter, 24kobo and third quarter 42kobo, keen observers of this stock are envisaging an EPS of 65kobo at the end of its financial year.
Again its dividend payout ratio is high; it pays as much as, sometimes, 60 percent of its earnings. Analysts say it is not good for a company to do such a thing because it could hold back the building of a robust reserve. But how they do it consistently tells of the resourceful persons in the bank.
Thus on the strength of this, analysts are of the belief that something might be in the pipeline for the shareholders this year. This group believe that shareholders can only gain this year, through price appreciation. Therefore for those who are asking where is the next port of call, this might just be it.
First City Monument Bank
This too is another bank that makes no noise but whose operations can be felt by its efficiency. Since its listing in 2007, it has been consistent in releasing reports both quarterly and yearly. The bank’s report for April 30, 2009 is long overdue. The public is also expecting its first quarter result for the months spanning May to July 2009. Analysts believe that the delay is not unconnected with the banking audit that the Central Bank of Nigeria embarked upon to asses the health of banks. But as expected, FCMB scaled through and is poised to release the results any moment from now. The bank’s EPS has also been consistently grown. For the year 2009, first quarter was 30kobo, second quarter 56kobo, third quarter 76kobo. Analysts are not too sure if there will be any dividend because if provision is made for bad debts, it might affect the possibility of dividend pay-out. If dividend is not paid, shareholders will be rewarded.
As an analyst, Mr Abel Ariwodo of Able Rock Investment Limited, puts it, “We simply would have woken up to find out that banks have shut their doors to customers as is the case with some microfinance banks; not necessarily because of their own mismanagement but that of the other banks. And we would have done nothing but rue over our loss for a time and move on”.
As the case is now, nothing is more agonizing than having your assets depleted in value as the stock market has done to investors. But John Ogbuji, an investor, said, he wants to recoup some of his losses by buying cheap now and sell at a later date.
Ogbuji’s strategy is to forget the past and start afresh. We will also recommend this strategy to our numerous readers as they invest now for price appreciation rather than dividend or bonus. The price appreciation will come as companies release impressive quarterly result and audited ones.
Having looked at the scenario, we advise our loyal readers to look the way of these stocks that could show price appreciation.
Fidelity Bank Plc
Since the listing of this bank on the exchange on May 17, 2005, it has regularly and consistently been providing the investing public with its quarterly and audited financial report for them to see and judge. This promptness of the bank, has endeared it to its shareholders. Moreover, it has progressively bettered its quarterly and yearly reports. The bank specializes in retail banking but its brand is creatively different from the normal retail banking that abounds here and there. Creative in the sense that even with its huge outstanding number of shares, 28.9billion, it still makes profit and pays dividend to its shareholders. The historical data of this bank shows that, even though it is not “loud”, it has been rewarding consistently its shareholders in the last four years. Its EPS has always been upwards. The EPS has been grown steadily by 62 per cent in the last four years.
As a matter of facts and figures, this bank has in this year 2009, grown its average quarterly earnings by 87 per cent. After it recorded first quarter EPS of 12kobo, second quarter, 24kobo and third quarter 42kobo, keen observers of this stock are envisaging an EPS of 65kobo at the end of its financial year.
Again its dividend payout ratio is high; it pays as much as, sometimes, 60 percent of its earnings. Analysts say it is not good for a company to do such a thing because it could hold back the building of a robust reserve. But how they do it consistently tells of the resourceful persons in the bank.
Thus on the strength of this, analysts are of the belief that something might be in the pipeline for the shareholders this year. This group believe that shareholders can only gain this year, through price appreciation. Therefore for those who are asking where is the next port of call, this might just be it.
First City Monument Bank
This too is another bank that makes no noise but whose operations can be felt by its efficiency. Since its listing in 2007, it has been consistent in releasing reports both quarterly and yearly. The bank’s report for April 30, 2009 is long overdue. The public is also expecting its first quarter result for the months spanning May to July 2009. Analysts believe that the delay is not unconnected with the banking audit that the Central Bank of Nigeria embarked upon to asses the health of banks. But as expected, FCMB scaled through and is poised to release the results any moment from now. The bank’s EPS has also been consistently grown. For the year 2009, first quarter was 30kobo, second quarter 56kobo, third quarter 76kobo. Analysts are not too sure if there will be any dividend because if provision is made for bad debts, it might affect the possibility of dividend pay-out. If dividend is not paid, shareholders will be rewarded.
