The board of directors of Union Bank of Nigeria (UBN) Plc has called an extraordinary general meeting of shareholders to consider cancellation of N54.46 billion accumulated permanent losses in the books of the commercial bank.
The Nation reports that shareholders are scheduled to meet next week to authorise the board of directors to reduce the company’s share premium account by N54.46 billion to net off the legacy deficit, thus removing the main drawback that had disallowed the commercial bank from paying dividends from its net profit.
According to the resolution, subject to the confirmation of the court, the bank’s issued share capital, including for this purpose its share premium account, be reduced by the sum of N54.458 billion which has been lost or is otherwise unrepresented by available assets and that the credit arising from the reduction be used to eliminate the retained loss in the company’s audited financial statements as at December 31, 2018.
The bank stated that a review of its financial position as at December 31, 2018 established a deficit of N54.46 billion as accumulated permanent losses from legacy transactions, in addition to the N247.87 billion, which had been approved by shareholders in 2017.
The bank explained that the proposed balance sheet restructuring will not affect its 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,” UBN stated.
The board of directors is proposing a reduction of N54.46 billion from the bank’s share premium account of N187.09 billion, 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 December 31, 2018.
UBN had grown its net profit by 39 per cent to N18.1 billion in 2018 but the bank could not declare dividend due to extant rules that disallow companies with retained deficit from dividend payment. Key extracts of the audited report and accounts of Union Bank for the year ended December 31, 2018 showed that gross earnings dropped by 11 per cent from N163.8 billion in 2017 to N145.5 billion in 2018. Net interest income declined by 17 per cent from N66.7 billion to N55.4 billion while non-interest income also dropped from N39.3 billion to N35.2 billion.
With 113 per cent reduction in credit impairment, net income after impairments increased by 16 per cent from N80.64 billion to N93.5 billion. Profit before tax thus increased by 33 per cent from N13.9 billion to N18.5 billion. Profit after tax also rose from N13 billion to N18.1 billion. Earnings per share however declined by 11 per cent from 72 kobo in 2017 to 61 kobo in 2018.