Analysts Estimate Moderate Dividend Payout for Banks

Analysts Estimate Moderate Dividend Payout for Banks

Against the backdrop of development in the economy, experts have said that there will be moderation in banks dividend pay-out ratio in 2020.

Despite the gloomy outlook however, Vetiva Capital Limited has also explained that the firm expects dividend pay-out to be relatively strong.

Vetiva said: “While we do not expect a year on year increase in dividend pay-out, we do foresee, at least, flat dividend pay-out for 2020”.

The firm explained that the banking sector has historically been a dividend paying sector, with the Tier-1 names excluding FBNH paying as high as 40% of earnings as dividend.

The pay-out pattern translating average dividend yield in the range of 9% and 15%, analysts stated.

Although, Vetiva explained that in recent fiscal year, it has seen moderation in dividend payments.

This was especially due to tougher operating environment and as banks have sought to retain more earnings in a bid to maintain adequate capital buffers.

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It would be recalled that the International Monetary Fund has advised banks to cut back their dividend payment to build up their capital base.

Vetiva Capital however explained that the nature of local equity space, any significant reduction would likely dampen investors’ sentiment and spur exits from the sector.

As a result, Vetiva said it does not expect increase in dividend pay-out, the investment banking firm expects dividend payment to be flat.

It said interim dividends will also stay flat as well.

Analysts expect performance of Nigerian lenders to be affected by the economic lockdown that incapacitates economic productivities.

Due to the need to restructure loans, and potentially high default rate among banks customers, estimates have been generally lower.

However, analysts predict that there will be an increase takings from non-interest related activities of banks in the year.

This would compensate for loss of earnings from the interest yielding assets, analysts told MarketForces.   

Analysts Estimate Moderate Dividend Payout for Banks