Zenith bank, Nigeria’s biggest bank by revenue and a tier 1 bank founded by Jim Ovia declared its half-year interim financial results last month. Half years interim financial results cover the revenue plus profit which the bank made from January to June of this year.
Zenith Bank, Nigeria’s second-largest lender in terms of market capitalization, disclosed on Aug. 28 that it recorded a three per cent growth in its profits from N103.8 billion ($252.2 million) in the first half of last year to N106.1 billion ($257.8 million).
The single-digit growth in the bank’s earnings was delivered off the back of a 26-per cent decrease in interest expenses, which mitigated a six-per cent decline in interest income.
In line with its resilient financial results, the board recommended an interim dividend of N9.4 billion ($22.8 million) out of the 106 billon profit made which translates to a payout of N0.30 ($0.00073) per share on all 31,396,493,786 ordinary shares held by shareholders.
Zenith bank has an excellent culture of rewarding its shareholders which I love so much.
They pay their shareholders twice every year after delivering a bumper profit for them
For this impressive financial result, I was interested to know how much that Jim Ovia is going to go home with as the Founder of the bank, also as the largest shareholder of Zenith bank and this is what I found out.
The highly revered banker is the single majority shareholder of Zenith Bank as he directly owns 5,072,104,311 ordinary shares of the units of the fast-rising bank stock out of the 31,396,493,787 ordinary shares available. This gives him a 12% direct interest in the Tier -1 bank.
Because of his shareholding, Jim Ovia will earn an interim dividend of N1.52 billion ($3.7 million) on Sept. 20.
Dividend is what Nigerians call ROI. It can also be called profit earned from a company.
The interim dividend payment this month will take his total direct earnings in 2021 to N11.1 billion ($27.05 million), as the multimillionaire banker previously received a final dividend of N9.58 billion ($23.35 million) from the bank this year.
So let me break this down for those who might not understand it.
Jim Ovia founded Zenith bank in 1992 and because he was the one who founded the bank, he wields an enormous influence in the bank and as well, he is the largest shareholder of Zenith bank today.
Because of his shareholding as the largest shareholder, Zenith bank will pay him an Interim dividend of N1.52 billion ($3.7 million) from the 106 billion naira profit that the bank made.
This interim dividend payment will come from the profit Zenith bank made in the last 6 months of 2021 and it is calculated based on the number of shares of the bank that he has.
This will take his total earnings so far from Zenith bank this year to N11.1 billion because he was paid 9 billion naira dividend by Zenith bank sometime in March as his share from the profit Zenith made in 2020.
I guess this is clear now right?
So let’s move, so why is this important?
It is simple: Jim Ovia is showing our generation of entrepreneurs how to run a structured global business that will outlast the founder in so many ways.
As I shared above, Zenith made revenue of N106.1 billion ($257.8 million) in the first half of the year.
Even though Jim Ovia is the founder of the bank, he does not have the right to touch the money or appropriate it for his personal use.
The money belongs to Zenith bank, a legal entity and not Jim Ovia.
The only thing Jim Ovia is entitled to monthly from the bank is the Director’s fee and allowances which are paid by the bank to him as the chairman of the bank.
Aside from this, before the Bank pays him his dividend which is paid twice a year, Zenith bank will first audit their book and it is from the profit that the bank made whether a half year or full year that Jim is entitled to earn his dividend.
As we can see, his profit from the bank for the half-year is N1.52 billion ($3.7 million) which will be paid to him tomorrow.
After the payment tomorrow, he will wait till next year when the bank will declare their financial statement for 2021 before he can earn another dividend from his bank.
Nothing stops Jim Ovia from instructing his MD of the bank Ebenezer to give him an urgent 50 million from the bank revenue because one of his side chicks need it to buy a property in Lekki but he cannot do it because he is forbidden by law to touch Zenith bank’s money as Zenith bank money does not belong to him.
If he flouts this law and then the MD of the bank gives him the urgent money for his side chic because the bank belongs to him by virtue of being the founder and largest shareholder, CBN will remove him as the chairman of the bank when they find out and there is no way they will not know.
The question needs to be asked: What if Jim Ovia needs urgent cash to buy a new car for one of his girlfriends, how does he go about it?
It is either he waits for his dividend to be paid or he applies for a loan which he is expected to repay back but one thing he has done which I like is that as a smart investor, he has diversified his income by investing in properties all over Victoria Island and Ikoyi that today, he is one of the biggest landlords in Lagos after Mike Adenuga
He also owns the civic event centre in Victoria Island and also a couple of commercial properties that Zenith bank rents from him so even if it is not yet time for Zenith bank to pay him his dividend and he needs urgent cash, he has a couple of investments and multiple streams of income to raise the money he needs without bothering the bank to give it to him.
As a small business owner, can you pick any lesson from this story shared above?
The biggest takeaways are these:
1) You don’t own need to own your business 100%. It is not necessary if you want it to scale and grow beyond you.
Jim Ovia owns 12% of Zenith bank, shareholders own the remaining 88% but that 12% has given him free 11 Billion naira profit, just this year alone.
You that own 100% of your business, have you made up to 1 billion naira in profit this year?
So know when to give up 100% ownership by inviting other people to invest in your business.
It is important.
2) Structure your small business by putting yourself on salary.
The revenue that the small business is making is not your money, it belongs to the company and you have to discipline yourself not to touch it
In case you need urgent cash, you can borrow small money from it and then remember to pay back the loan because the money does not belong to you, it belongs to the company.
3) Just like Jim Ovia’s Zenith bank is doing, you can either pay yourself Interim dividend after you have audited your account to know how much profit the business brought half a year or wait till the end of the financial year, audit your book and then from the profit, pay your self what you believe you deserve to earn but don’t take everything, remember you will need to plough some profit into the business.
4) And for my friends running investment businesses who need to pay investors that gave them money that they are using to run their business, just like Zenith Bank, Jim Ovia had investors who invested in his dream of building Nigeria’s biggest bank by revenue when he was starting in the ’90s, another set of investors who invested when the businesses have consolidated but he does not pay them monthly ROI till today. He does not even offer any percentage as Return on investment. What the bank does is this:
Trade with your money, at the end of half-year, they audit their account and then inform shareholders how much they made as profit and revenue.
Shareholders are entitled to earn dividends from the company’s profit, whether half or a full year on the strength of the shares they have with Zenith bank.
This is how I understand this thing works, my friends who run investment companies can structure their business that way using the Zenith bank model.
Payment of monthly ROI is a slippery slope that may lead to the company turning to a Ponzi scheme even though that was not the original intention of the promoters but when you cant meet up in monthly ROI payment to your investors due to the uncertainty in the macro and micro business climate in Nigeria at the moment, you will rob Peter to pay Paul.
It is inevitable.
Also investment companies should always remember to audit their book, it is from the audited book that investors can be paid.
Zenith bank audited their books before they paid Jim Ovia his ROI.
If you are not doing this and you are paying investors, my dear, you are running a Ponzi.
So I hope to see my generation of entrepreneurs build businesses that will outlast us, businesses that will grow tomorrow to be the next Zenith bank but building businesses like that requires doing the right thing from the humble beginnings which one of them is structuring the business by making sure that you separate yourself from the company’s money.
With this, I hope to see so small many businesses today grow into the Zenith bank of tomorrow.
It is possible!