Why Zenith Bank suspended initial public offer

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Zenith Bank2
Zenith Bank2

Most deposit money banks are anxious to place initial public offer (IPO) to raise fresh capital injection into the system. This is justifiably so considering the credit crunch which is assailing most sectors of the economy, including banks.

Like most banks, Zenith Bank had initially announced plans to raise N100 billion fresh funds. But the management soon made a volte-face at its 26th Annual General Meeting (AGM) held in Lagos thus aborting the plan at the meeting.

Expectedly, shareholders of the bank approved the request of the board to step down the plan to raise fresh capital.

Justifying the suspension of the plan, Chairman of the bank, Mr. Jim Ovia, at the meeting said the bank decided to suspend the idea because of macro-economic challenges in the country and also that the time was not right for such scheme.

The bank had expected market conditions to improve when it announced plans to seek approval for the funds last month, said Zenith’s Head of Investor Relations, Michael Anyimah, but the lender cancelled them due to the struggling economy.

In its annual report, the bank said: “That the directors be and are hereby authorised to raise, whether by way of a public offering, rights issue or any other method(s) they deem fit, additional capital of up to N100 billion or its equivalent whether locally or internationally or a combination of both, through the issuance of shares, convertible securities or non-convertible securities, global depository receipts, medium term notes, loan notes, bonds and or any other instrument(s).

“Whether as a standalone transaction or by way of a programme; unlisted or listed locally or internationally in such tranches, series or proportions, at such coupon or interest rates, within such maturity periods, at such dates and time and on such terms and conditions, including through a book building process or other processes all of which shall be determined by the Directors; subject to obtaining the approvals of relevant regulatory authorities.”

During the year, the bank said it incurred some contraventions of the regulation of the Banks and Other Financial Institutions Act, 1991. In all, the bank paid a total of N16 billion as penalties for contraventions in the year under review.

These include N2 billion penalty on returns of foreign currency transactions, N4 billion as penalty for contravening DMO Act of 2003 on lending to tiers of government and N10 billion as penalty for incomplete customers’ documentation.

There were mixed reactions among shareholders of the bank on the decision not to go ahead with the offer.

A shareholder activist and Chairman of the Progressive Shareholders Association of Nigeria, Boniface Okezie, said there was no crime in the decision of the bank to stand down its decision to raise the fund, as he added that it is better  that the bank did not go for it than for it to end in a disaster.

“I think the decision of the bank should be respected. It is better that it did not go ahead with the offer than to lose out at the end. A bank like Zenith Bank cannot afford to fail at this time because they are the leader in the sector as of today. I will not dwell too much on the issue because it is both safe for the bank and the shareholders,” Okezie said.

Meanwhile Shareholders of Zenith Bank Plc are smiling to the banks has the bank  approved final dividend of N55.573 billion, bringing the total dividend for the year ended December 31, 2016 to N63.422 billion. Lagos.

While approving the dividend, the shareholders commended the board, management and staff for growing its profit after tax by 23 per cent from N105.531 billion in 2015 to N129.65 billion in 2016. The bank ended the year with gross total assets N4.739 trillion, up from N4 trillion in 2015.

Addressing the shareholders, Ovia said despite the challenging operating environment, the bank was able to fully exploit the available opportunities to post the impressive results.

According to him, in line with its commitment to delivering superior returns to its much-valued shareholders, the bank ensured that a good chunk of the profit is set aside for them.

“In this regard, we have declared and paid you an interim dividend of 25 kobo per share in the course of 2016 financial year. We hereby propose a final dividend of 177 kobo per share. This brings the total dividend for the year ended December 31, 2016 to 202 kobo per share as against 180 kobo per share paid the previous year,” Ovia said.

He stated that even in the face of a very challenging operating environment, Zenith Bank has maintained its culture of outstanding performance and industry leadership.

“As a bank, we are monitoring developments both in the local and global economy and applying pragmatism and dynamism as appropriate. Our strategy and approach to the pursuit of financial inclusion and sustainability gives us a lot of competitive advantage to explore even new frontiers in the market,” he said.

Echoing similar sentiments, Group Managing Director/Chief Executive Officer of Zenith Bank, Mr. Peter Amangbo said as an institution of well-primed people, the bank relied on a its pool of exceptional staff to make sound and timely decision and addressed issues in a manner that anticipated developments and demonstrated excellent understanding of the dynamics of the market and economy in 2016.

He assured that “We shall continue to demonstrate extraordinary commitment to our customers while maintaining focus on all the areas fundamental to adding value to our partnership.”

Looking ahead, he said although 2017 will come with its challenges, and opportunities, “but I am confident that our determination, resolve and rare commitment to customer s well as our adaptive ability will ensure resounding results.”

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