Analysts have expressed confidence that Nigerian banks will recover from the impact of the Central Bank of Nigeria’s directive on Single Obligor Limits and credit forbearance exposure, and pay dividends in 2025.
Despite the challenges posed by the directive, banks such as FCMB, Zenith Bank, Access Holdings, and Fidelity Bank have reassured investors that they will comply with regulatory directives and pay dividends in the current year.
Meristem researchers predict that Zenith Bank and FCMB Group may be able to pay interim dividends, while Stanbic IBTC Holdings and Guaranty Trust Holding Company will continue dividend payout, given they had made adequate provisions before the CBN directive.
“The CBN’s directive targets a specific subset of banks under forbearance and does not imply systemic capital distress. We expect the banks that have cleared their forbearance positions, such as GTCO, Stanbic IBTC, and potentially FCMB and Zenith Bank, to declare interim dividends.
“Yield-seeking investors can expect dividend continuity from cleared banks, which continue to deliver strong returns on equity and maintain well-managed risk-weighted assets. Even after the recent selloff, these banks remain attractively priced, with forward dividend yields projected in the 7 per cent–10 per cent range,” said the Meristem Capital report.
CardinalStone Partners shared similar sentiments, stating that affected institutions can still pay dividends this year if they have adequately provided for their forbearance loans and met the standard regulatory capital adequacy ratio.
“However, dividend payment for banks will only be permissible if they have adequately provided for their forbearance loans and have met the standard regulatory capital adequacy ratio of 10 per cent for National Banks and 15 per cent for International Banks.
“Banks need not totally write off their outstanding forbearance loans. Upon regularising the associated credit exposure based on IFRS standards, banks only need to ascertain that the loans are adequately provided for during the reporting period,” they stated.
The analysts noted that banks with holding company structures and geographical diversification are likely to be less affected by the directive, citing examples such as FCMB Group’s non-bank subsidiaries and United Bank for Africa’s non-Nigerian operations.
Overall, analysts are optimistic that Nigerian banks will be able to navigate the challenges posed by the CBN’s directive and resume dividend payments in 2025.
Recall that FCMB, Zenith Bank, Access Holdings, and Fidelity Bank, in their statements, reassured investors that they would comply with regulatory directives by June 30 in terms of SOL and credit forbearance exposure, as well as be in a position to pay dividends in the current year.
First HoldCo, in its own statement, indicated that it would be able to cure the SOL breach of its banking subsidiary, FirstBank, in the second half of 2025 upon the completion of its planned capital raise. First HoldCo added that the SOL breach is related to two customers with foreign currency loans arising from over 200 per cent currency devaluation in 2023.
The capital market opened bearish at the start of the week as investors dumped banking stocks in reaction to the news. The banking index has recovered somewhat in the face of clarifications as to the impact of the directive and reassurances from the CBN.
