Nigeria’s oldest surviving indigenous bank, Wema Bank Plc, has started arrangements to undertake a capital reduction exercise to clean its balance sheet of legacy losses and other impaired assets.
In a regulatory filing signed by Company Secretary/Legal Adviser, Wema Bank Plc, Mr Oluwole Ajimisinmi, at the weekend, the bank stated that it has already called an extra ordinary general meeting of its shareholders to consider the comprehensive capital reduction exercise.
The bank indicated that it will create a capital reduction account to charge off impaired assets and losses that were accumulated prior to the emergence of the current management by moving the equivalent amount from its share premium account to effectively close the entries.
The bank noted that the capital reduction will have no impact on the shareholdings of the bank.
According to the bank, the comprehensive capital reduction represents an holistic approach that will enable it position its balance sheet for improved efficiency.
“Though the bank has since returned to profitability in the last four years, the impaction of negative retained earnings and other impaired assets is that, the bank, by regulation, is precluded from providing necessary returns by way of dividends to shareholders and most importantly, restricts the ability and cost to raise new capital”, the bank stated.
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