RETURN TO DIVIDENDS : Cobac Lifts Payment Suspension

The shareholders of the Cemac banks must certainly be delighted. After three years of drought, credit institutions in the Cemac region have been authorized by the Central African Banking Commission (Cobac) to pay dividends. In a correspondence sent on September 19, 2022 to credit and microfinance institutions, Maurice Ouanzin, the secretary general of Cobac announced that he was putting an end to the suspension of dividend payments within these entities.

The decision, which also concerns microfinance, was adopted in 2020 in the midst of the Covid 19 pandemic to allow taxable persons to continue financing the economy while being able to absorb certain losses related to the health crisis. Set for December 31, 2021, the initial deadline had been extended to June 30, 2022.

With the suspension lift, several credit institutions that have achieved a profit have been rewarding their shareholders for the 2022 financial year. This is the case in particular of BgfiBank which distributed 7 billion FCFA (70 % of the profit for the year) to the shareholders of its Cameroonian subsidiary as dividends, we learned at the end of the general meeting of the banking group, held on April 18 last year. This is also the case for the Regional Bank with 1.5 billion FCFA distributed. The former microfinance had to draw on its reserves to reach this amount, the profit for the year having been 1.2 billion FCFA. Of the 14.5 billion profits earned, UBA Cameroon has granted almost half to its shareholders, i.e. 6.1 billion FCFA.

The distribution of dividends remains good news for shareholders even if the boards of directors often remain divided on the issue. Because by reinvesting its profits, the company wants to strengthen its position on the market ; which will be beneficial to shareholders over the long term. For example, Microsoft’s abstention from paying dividends allowed the company to increase its share value by more than 1 000 % in 10 years.

Some schools of thought believes that the payment of dividends leads to a destruction of the value of stock. « Distributing dividends amounts to taking part of the net result, which is a component of equity. Then, basically, the company’s market capitalization is the market value of all the company’s own funds. Thus, it is logical that the share falls at the height of the amount of the dividend since the latter represents cash that was taken into account in the valuation of the company », explains an expert.

Sorelle Ninguem

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