Nigeria’s Wema Bank plans share restructuring

Nigeria’s Wema Bank said on Friday it plans to seek shareholders consent at an extra ordinary general meeting for a comprehensive scheme of capital reduction to enable it position its balance sheet for better efficiency.
The shareholders’ meeting is slated to hold on October 20, this year
In a letter to the Nigerian Stock Exchange (NSE), the bank said the holistic capital reduction scheme would have no impact on the current holdings of shareholders.
It said will be creating a capital reduction account to charge off the impaired assets while an equivalent amount will be moved from its share premium account to effectively close the entries.
According to Wema Bank, it has been carrying a negative retained earnings balance, which arose from losses prior to the emergence of the current management in 2009.
While the bank has since returned to profitability in the last four years, the bank noted that the negative retained earnings balance and other impaired assets continue to hamper the ability of the bank to payout dividend to its shareholders.
It said by regulation, the bank “is precluded from providing necessary returns by way of dividends to shareholders and most importantly , restricts the ability and cost to raise new capital.”
The bank had secured the approval of the Securities and Exchange Commission (SEC) to raise 50 billion naira bond, but has only been able to raise 6.25 billion naira portion of the debt.
Wema Bank announced the suspension of the debt raise in August, attributing the suspension to hostile interest rate regime.
“If interest rates don’t reduce, we probably will not raise the bond this year and we might have to wait till April or May this year,” the bank chief financial officer said two months ago..