Wema to fix negative retained earnings with capital reorganisation

The management of Wema Bank says it will resolve the issue of longstanding negative retained earnings with capital reorganisation.

Retained earnings are the portion of net income not paid as dividend but retained by the company for reinvestment or debt payment.

According to a statement issued by the bank, it received shareholder’s approval of the planned capital reorganisation at its extraordinary general meeting (EGM) on Friday.

“With this approval, Wema Bank would give effect to the creation of a capital reduction account (CRA), the transfer the negative balances in the retained revenue account to the capital reduction account (CRA), reflect the carrying amounts on the specified assets based on their current economic values while effectively setting-off these balances against the share premium account.”

The bank said it will also seek approval from the federal high court and pass all accounting entries before the end of the 2017 financial year.

Also, it said the exercise will make it well positioned to start dividend payments to shareholders.

Commenting on the Q3 results of the bank, Segun Oloketuyi, CEO of the bank, said high interest rate impacted earnings because interest expense increased year-on-year.

“Gross earnings grew by 16.79% from N37.89 billion in Q3 2016 to N45.38 billion as at Q3 2017.

“This was supported by increased contribution from non-interest income which rose by 35.74% from N5.96 billion in Q3’2017 to N8.09 billion, as at Q3’2017.

“The high interest rate environment continued to impact earnings, as interest expense increased year on year.

“Despite this, the bank recorded a growth in profit before tax by 20.81% to N1.80 billion. We expect that as interest rates trend downwards, our funding cost will decline, leading to improvements in our margins.”