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Thursday, March 23, 2023

Unity Bank Negative Reserves Hinder Dividend Payment

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Technical insolvent Unity Bank Plc is the only listed lender that will not be rewarding shareholders as negative retained earnings that stems from recurring losses hinder it from paying dividend.

While the Bank has been recording profit in the past 3 years, it will take some time before it wipes out the deficit in the balance sheet.

Of course, the Central Bank of Nigeria only allows banks to pay dividends from distributable profit so as to protect their capital from macroeconomic headwinds.

During the coronavirus pandemic that killed millions of people across the globe and caused economic shock, the European Central Bank and the Reserve Bank of India asked lenders not to pay dividends to conserve capital.

Unity Bank’s retained earnings stood at negative N370.86 billion as at December 2022, from a position of negative N371.73 billion the corresponding period of 2021.

Its total liabilities of N787.10 billion exceeds total assets of N511.18 billion as at December 2021, which makes the lender technically insolvent.

There is light at the end of the tunnel as the Bank has remained profitable over the past few years, thanks to a high yield environment and growth in the Non-Interest Revenue (NIR)

However, Unity Bank’s net income or profit after tax (PAT) dipped by 57.72 percent to N1.34 billion in December 2022 from N3.17 billion the previous year.

Interest income on loans and advances were up 13.54 percent to N49.03 billion in the period under review from N43.18 billion the previous year.

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