Story by Olabode Jegede
In a move to escape from retained deficit, Union Bank of Nigeria is set to propose share premium reduction of N54.5 billion in an Extra-ordinary General Meeting coming up this week.
Union Bank of Nigeria and Unity Bank are the only listed banks on the Nigerian Stock Exchange (NSE) with retained deficit, our correspondent can report.
A review of the Bank’s financial position as at December 31, 2018, established a deficit of N54.5billion as accumulated permanent losses from legacy transactions, in addition to the N247.9billion approved by shareholders, in 2017.
The lender in a report to the NSE said, “The balance sheet restructuring proposed will not affect the Bank’s authorised or issued share capital or regulatory capital but should result in a reduction of the credit balance in the Bank’s Share Premium Account, while leaving the aggregate shareholders’ funds unchanged.
“It would have no impact on the Bank’s creditors but rather, pave the way for the Bank’s investors to receive dividends out of the Bank’s future profits.
“In terms of mechanics and structure, the Bank’s Board of Directors is proposing a reduction of N54.458billion from the Bank’s Share Premium Account of N187.091billion, pursuant to sections 106 and 107 of Companies and Allied Matters Act (CAMA).
“The reserve arising from the reduction of capital would be used to eliminate the negative retained earnings as at 2018 financial year,” a statement by the bank said.
The lender explained further that shareholders of the Bank will consider and, if thought fit, approve the Capital Reduction and Share Capital Reorganization.”
The bank in 2018 had successfully executed a debut local currency bond issue to raise N13.5billion, in a move to tightening up of its loan portfolio, and positioned the bank to continue executing key business priorities this year.
Union Bank of Nigeria had reported Profit before tax increase of 33 per cent to N18.5billion in 2018 from N13.9billion in 2017.
The MD/CEO, Union Bank of Nigeria, Mr. Emeka Emuwa had said, “local currency bond programme to raise N13.5 billion. We are encouraged by the market and investor community response to the bond issue and subsequent listing on the FMDQ platform as we continue our drive to optimize the Bank’s capital and funding structure.
“In 2019, we will double-down on our productivity efforts to deliver our financial targets. We are harnessing synergies across our business segments to ensure we maximize opportunities across entire value chains, while centralising key business and operational functions for better efficiency, and prioritizing customer experience across all our touchpoints.”