(Sundiata Finance) – Nigerian Banks are sitting on a huge pile of cash, which means they have more money to reward shareholders in form of dividend payment, or to fund any future expansion plans.
Investors want to know the current cash flow position of a firm because it forms the basis on which they can assess the financial strength of a company.
The cumulative cash and cash and equivalent in the balance sheet of the 13 lenders that have released half year results for 2017 increased by 6.48 per cent to N3.55 trillion in June 2017.
Analysis of the numbers shows that six of the 13 banks recorded a reduction in cash and cash equivalent albeit none has cash flow challenges.
First Bank Holdings has the strongest current cash flow position as cash and cash equivalent increased by 36 percent to N1.22 trillion as at June 2017; net cash from operating activities spiked by 83 percent to N587.53 billion in the period under review.
Access Bank’s cash and cash equivalent grew 12 percent to N323.85 billion as net cash from operating activities stood at N86.53 billion.
Zenith Bank’s cash and cash equivalent increased slightly by 1 percent to N642.61 billion; GTBank’s cash and cash equivalent fell by 43 percent to N162.50 billion; UBA’s cash and cash equivalent dropped 6 percent to N328.59 billion.
At the Tier 2 front, Union Bank’s cash and cash equivalent rose 34 percent to N183.07 billion; Stanbic IBTC Holdings’s cash and cash equivalent climbed 52 percent to N191.31 billion; Sterling Bank’s was flat at N76 billion.
With robust cash flow generation, lenders can afford to return more cash to shareholders in form of dividend or buybacks or embark on aggressive acquisition.
Some Nigerian lenders are among the best dividend paying stock on the Nigerian Stock Exchange (NSE) as
Zenith, GTBank, Access, and UBA recommended a combined interim dividend of N29.68 billion for 2017 financial year.
Zenith recommended the highest interim dividend of N7.85 billion, which is 0.25k per share, with a closure date of 21st August of 2017.
Guaranty Trust Bank followed with N7.35 billion or N0.25 per share pay-out with the closure date for payment to shareholders being 24th August 2017.
UBA Plc is paying out N7.25 billion (N0.20 kobo per share) in dividends and its shares have gained 116.15 percent since the start of the year.
Shareholders of Access Bank will receive an interim dividend totalling N7.23 billion or 0.25 kobo per share, with a closure date of 7th September 2017.
In 2008, Access Bank bought 90 percent stake in Banque Privee du Congo and 75 percent of Rwanda’s Bancor Bank.
In 2013, GTBank made an inroad into Eastern Africa by acquiring 70 per cent stake in Kenya’s FinaBank.
Analysts are of the view that a strong current cash flow position and improved income on the back of the Investors’ and Exporters’ window introduced by the central bank means the Tier 1 Banks are in a better position to sustain dividend paying streak and make some level of acquisitions. (BusinessDay)