Nigeria central bank to regulate bank dividend payments

* Central Bank's decision could hurt banking stocks

* Banks must meet capital adequacy ratio, have cash reserves

* Central bank wants banks to loan to real economy

Nigeria's central bank has introduced new rules to prevent banks that do not meet minimum capital requirements from paying dividends in a bid to shore up the sector, according to a document seen by Reuters.
The central bank said in a circular dated Oct. 8 sent to lenders and discount houses that the amount banks can pay in dividends would depend on their capital levels, statutory reserve requirements and the proportion of non-performing loans.
In the past, lenders paid out a high proportion of net profit as dividends, despite their risk profiles and capital levels. The regulator said it wanted to correct this situation with the new rules.
"There shall be no regulatory restriction on dividend payout for banks that meet the minimum capital adequacy ratio, have a cash reserve requirement of 'low' or 'moderate' and a non-performing loan ratio of not more than 5 percent," the regulator said in the circular.
The central bank has vowed to prevent a repeat of the circumstances that led to a bailout in 2009 and has moved towards strenghtening rules and tightening capital requirements.
Since last year, Nigerian lenders have also been facing a profit squeeze as a result of regulatory measures put in place partly designed to get banks to lend more to domestic businesses and consumers.
The banking sector had been making bumper profits by mopping up government deposits and using the cash to buy high-yielding treasury bonds and declaring huge dividends. As a result, banks had little incentive to lend to the real economy.

BANK STOCKS MAY SUFFER
Analysts welcomed the new rules on dividends but said they might hurt banking stocks if cash payments to investors fall. The rules may also lower loan growth as banks try to conserve more cash, which in turn could hit profits.
Banks have also had to adopt stricter international capital requirements, which has seen capital ratios for most lenders drop by 100-400 basis points to near the regulatory minimum of 16 percent under the new rules.
Analysts at Renaissance Capital said FBN Holdings, United Bank for Africa (UBA) and FCMB have capital ratios close to the minimum requirement.
But some have also been shoring up their balance sheets. Access Bank got the nod from shareholders to raise up to 68 billion naira this month, while Sterling Bank plans to seek approval to raise $320 million.
Rival lender UBA has announced plans to raise capital while Diamond Bank and Unity Bank have just concluded rights issues.
"We do not think GT Bank, Zenith and Stanbic get affected much by these directives ... we expect them to consider lowering payout ratios from 2014. Other banks in a less favourable capital position are likely to have deeper dividend cuts," Renaissance Capital said.
Nigeria's banking sector index, which accounts for around 40 percent of total market capitalisation, has gained 32 percent so far this year. It lost 10 percent last year, owing to heavy burden from tight regulation which cramped profits.