By Nkiruka Nnorom
SHAREHOLDERS of Wema Bank Plc have approved the plan by the bank to reduce its share premium capital by N40.172 billion to N8.698 billion from N48.870 billion.
In line with this, the shareholders also approved the creation of a Capital Reduction Account, CRA, for the purpose of transferring the negative balance of N40.172 billion from the share premium account and turn it positive.
According to the Scheme of Capital Reduction, the bank’s deferred tax assets would be written down with the sum of N500 million and be transferred to the CRA, while the outstanding balance on the deferred tax asset would be used to offset future tax liabilities.
The negative balance of N39.128 billion as at December 31, 2016 would also be transferred from the retained earnings to the CRA, while another N544.3 million would be written off to reflect the carrying amount of some of the impaired assets.
Addressing shareholders at the Extra-Ordinary General Meeting, EGM, in Lagos, the chairman, Mr. Babatunde Kasali, said the bank understands the importance of return on any investment decision and has considered it necessary to explore all alternatives within the regulatory confines in a bid to position the bank for greater efficiency.
He explained that the proposed capital reduction would not have any impact on the shareholders’ fund or the current holding of shareholders, adding that the scheme would eliminate the negative balance on the bank’s revenue reserve account as at December 31, 2016 and enhance its capability to declare and pay dividends to shareholders.
Kasali added that with a clean statement of financial position, the bank’s rating would improve, making it possible for it to attract funding at competitive price within and outside the country, while also operating efficiently..
“Wema Bank in the past reported significant operating losses due to the high incidence of non-performing loans, NPL, and write-off of legacy loans, which culminated in the accretion of negative balance in the bank’s revenue reserve account. As at December 31, 2016, the negative balance in the bank’s revenue reserve account was N39.138 billion.
However, following the change of management by the bank and the implementation of several strategic initiatives by the Board, the plethora of challenges bedeviling the bank now appears to be over as the bank has emerged healthier with a positive post tax profit of N2,59 billion, N2.33 billion, N2.37 billion and N1.596 billion as at the year ended December 31, 2016, 2015, 2014 and 2013 respectively in contrast to a loss of N5.04 billion and N4.23 billion recorded in 2012 and 2011 respectively,” he said.