- Banks that do not meet the minimum capital adequacy ratio (banks with international license: 15%; Systemically Important Banks: 16% ) will not be allowed to pay dividend
- Banks with non-performing loans (NPLs) above 10% will not be allowed to pay dividend
- Banks that meet the minimum CAR requirement but have NPL ratio of more than 5% but less than 10% will be allowed to pay a maximum of 30% of earnings as dividend
- Banks with CAR of at least 3% above minimum requirement and NPL ratio of more than 5% but less than 10% will be allowed to pay up to a maximum of 75% of earnings as dividends.
- Banks that meet the minimum capital adequacy ratio and non-performing loan ratio have no regulatory restrictions to pay dividend.
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.