Renaissance Capital lists major banks affected by CBN dividend suspension policy

Some of Nigeria’s largest banks, including Zenith Bank, FirstBank, and Access Bank, are likely to be the most affected by the Central Bank of Nigeria’s (CBN) recent directive suspending dividend payments and bonuses for institutions benefiting from regulatory forbearance, a new report by Renaissance Capital has shown.

The CBN, in a circular dated 13 June and signed by its Director of Banking Supervision, Olubukola Akinwunmi, directed banks under regulatory forbearance to halt dividend payments to shareholders, defer bonuses to directors and senior management, and suspend investments in foreign subsidiaries or offshore ventures.

The policy, the CBN said, is part of efforts to strengthen capital buffers and encourage internal capital retention in the banking sector.

Renaissance Capital’s updated research report, issued on Monday following the directive, shows that Zenith Bank, FirstBank, and Access Bank have the highest levels of exposure to regulatory forbearance, with 23 per cent, 14 per cent, and 4 per cent of their gross loan books, respectively, tied up in such arrangements.

Banks under regulatory forbearance are typically those granted temporary relief by the central bank to avoid breaching prudential requirements—such as the Single Obligor Limit (SOL) or capital adequacy thresholds—often due to large, troubled exposures. According to the report, these exposures are “predominantly concentrated in loans to a major Oil & Gas counterparty, particularly in the upstream and refinery subsectors.”

Renaissance Capital said that, based on the scale of their exposures and current provisioning status, the banking arms of Access Corporation, First Bank Holdings, and Zenith Bank may be unable to resume dividend payments until 2028.

“Following the CBN’s directive, we expect the banking arms of Access Copr, First Hold Co, and Zenith Bank to pause dividend payments until they have fully provided for their forbearance exposure and single obligor limit exposures. Specifically, we anticipate that the banking arms of ACCESSCORP, FIRSTHOLDCO and ZENITHBANK to potentially resume dividend payments in 2028.

“As such, we expect dividend payments henceforth to come from the non-banking subsidiaries of the above-mentioned Groups. Given that majority of these Group’s income is primarily from their banking business, we do not see any substantial dividend payments from their non-banking subsidiaries,” it said.

In contrast, GTCO and Stanbic IBTC have no regulatory forbearance exposure, with GTCO having already provisioned and written off its previous exposures. For Fidelity Bank and FCMB, the report estimates forbearance levels at 10 per cent and 8 per cent respectively, while UBA’s exposure remains modest, between 5 and 6 per cent of its gross loan book.

The report said UBA is in a stronger position due to its solid cash earnings and manageable risk profile. Dividend payments from the bank are expected to resume by 2026 at the latest.

GTCO, the report added, stands out for its proactive approach to provisioning, and is not expected to pause dividend payments this year or in the foreseeable future.

While dividend suspensions are set to weigh on shareholder returns across the sector, the impact will differ. GTCO and Stanbic are likely to remain unaffected, while UBA’s relatively healthy cash position supports a quicker recovery.

The report also pointed to a notable gap between accounting and cash profits at some banks, largely driven by unrealised interest income on Stage 2 loans and foreign exchange gains that have yet to convert into actual cash inflows.

For instance, in 2024, Access Corporation earned N3.5 trillion in interest income, but only N1.9 trillion was received in cash, with the difference partly attributed to the group’s pan-African expansion strategy. Similarly, Zenith Bank earned N2.7 trillion in interest income but received only N1.5 trillion in actual cash, due to its high forbearance exposure and unrealised FX gains totalling N1.1 trillion.

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“Dividend payouts require actual cash, [so] cash profits provide a more reliable basis for forecasting dividends than accounting profits,” Renaissance Capital said.

The firm expects that the majority of dividend payments from groups like Access, Zenith, and FirstBank will come from non-banking subsidiaries, though it warns that these subsidiaries are unlikely to generate substantial income compared to the core banking operations.

The CBN’s new directive, combined with the ongoing recapitalisation requirement for banks to meet a N500 billion minimum capital base, is expected to reshape shareholder expectations and encourage affected institutions to strengthen their balance sheets in the near term.