Recapitalization: UBA offers shareholders over 17% yield to reinvest dividends

United Bank for Africa Plc (UBA) is offering its shareholders a lucrative opportunity to reinvest their 2023 dividends as the bank seeks funds for recapitalization.

The bank said investors can retain their dividends from last year in a dedicated account that offers 17.875% interest until they reinvest the money in the third quarter of the year.

In line with the Central Bank of Nigeria’s recent directive for top-tier banks in Nigeria to increase their capital base to N500 billion, UBA, one of Africa’s largest banks, has indicated it will first ask existing investors to reinvest through a rights issue.

With its current paid-up capital of N115.8 billion, UBA needs additional N384.2 billion to meet CBN’s requirement for an international banking license.

If the bank is unable to raise that much through rights issue, it will have the option of asking a select group of high-net-worth investors to invest through private placement, before considering a public offering.

The rights issue is scheduled for the third quarter of 2024 but the bank has not yet disclosed the exact offering price per share yet.

At the bank’s annual general meeting last week, bank chairman Tony Elumelu encouraged investors to reinvest their entire 2023 dividends. The bank is distributing a dividend of N2.30 per share for last year.

Mr Elumelu, who is the bank’s largest shareholder with a holding of about 2.54 billion shares, said he would reinvest all his dividends for 2023.

“I’m advising shareholders, as you get your dividends, reinvest a significant part of it. My group and I, we would be investing 100% of the dividends we get,” he was quoted as saying.

“If we don’t do so, we would be leaving food on the table for others who did not labour for it.”

Attractive option for reinvestment

In a note to shareholders, the bank said it will provide them with the option to retain their dividends in a dedicated account, offering a return of 17.875% until the commencement of the rights issue in the third quarter.

The bank said the interest rate would remain in effect until the conclusion of the rights issue, ensuring investors a guaranteed return on their reinvested dividends.

“Following the highly successful 62nd Annual General Meeting (AGM) of United Bank for Africa Plc, where we formally presented our exceptional financial performance to our esteemed shareholders, we are pleased to present to you an opportunity to invest your dividends in a special deposit account at an all-high interest rate of 17.875%,” the bank said.

“This will provide you with the opportunity to invest in our upcoming rights issue that will commence in Q3 2024.

“The above rate will subsist until the conclusion of our capital-raising exercise.”