Equity Group chief executive James Mwangi
The families of Jomo Kenyatta, former Central Bank of Kenya Governor Philip Ndegwa and Equity Group chief executive James Mwangi will pocket KSh1.62 billion (UShs50.94bn)in the wake of record banking profits that have delivered outsize shareholder payouts.
The Kenyattas lead the pack with a payout of KSh652.5 million (UShs20.5bn) from their 13.2 percent stake in NCBA Group , which on Wednesday doubled its dividend per share to KSh3 for the year to December 2021.
The Ndegwa family, which owns 11.7 percent stake in the bank, will earn KSh580.8 million (UShs18.27bn)in dividends for the period.
NCBA, which emerged from the merger between the listed NIC Bank and the private CBA Group in 2019, on Wednesday said its profits for the year to December more than doubled to KSh10.22 billion (UShs321.5bn) from KSh4.57 billion (UShs143.8bn) in 2020, helped by higher income and a fall in loan loss provisioning.
This performance is replicated across the industry, with most banks that have reported the full-year results indicating triple-digit profit growth besides having built surplus capital as costs for loan defaults fall and lenders resume lending.
The seven of nine tier-one banks that have already reported their financial results for 2021 have nearly doubled their net earnings, raking in KSh128.1 billion compared to KSh69.9 billion in 2020.
Equity Bank on Tuesday announced its first dividend in three years – KSh3 per share – after doubling net profit to KSh40 billion (UShs1.25 trillion).
Mr Mwangi, who owns a 3.4 percent direct stake in Equity, will as a result cement his position as the biggest individual dividend earner with a payout of KSh383.4 million (UShs12bn).
This amount is higher than the annual net earnings of more than a third of NSE-listed firms, underlining the impact of Equity’s profitability and the size of Mr Mwangi’s stake in the bank.
His 188.6 million shares in Equity currently have a market value of about Sh6.52 billion, marking one of the single-largest investments in a publicly-traded firm by an individual.
Kenyattas’ stake in NCBA stood at KSh5.46 billion while Ndegwas’ ownership is worth KSh4.89 billion.
Equity did not pay dividends for 2019 and 2020, citing the need to build a capital buffer after the pandemic hit the banking sector and the economy at large hard.
The company also walked away from a proposed share swap deal to acquire from four regional banks Atlas Mara that would have also required additional capital injection.
The payouts, therefore, represent a turnaround for the top bank owners, who had to endure lean times in terms of dividends in 2020 as the lenders adjusted to a leaner operating environment due to Covid-19.
Like Mr Mwangi, Co-operative Bank CEO Gideon Muriuki owns a significant stake in the bank he has shepherded for more than two decades.
Mr Muriuki will pocket Sh102.68 million from his 1.75 per cent stake in Co-op Bank after it maintained a dividend of Sh1 per share for the second year running.
The bank reported a 53 percent jump in net profit to Sh16.5 in 2021.
Co-op Bank will also pay individual investor Baloobhai Patel Sh34 million in dividends for the period for his 0.58 percent stake, which combined with a payout of Sh46.8 million from Absa Kenya means he takes home Sh80.9 million from the two lenders.
The dividend boom also comes after the Central Bank of Kenya (CBK) loosened restrictions on shareholder payouts as the country recovers from the Covid-19 economic fallout.
The CBK in August 2020 asked commercial banks to seek its approval ahead of paying dividends for the year ended December, which saw top lenders freeze payments.
The dividend caution came as bank earnings plunged in the first half of last year, hit by higher provisions for bad loans on the back of the Covid-19 pandemic that triggered layoffs and business closures.
But the lenders have turned the corner following the record profits as they seek to expand their loan books and shift from government securities.
This outlook has made the CBK calm, bankers say, despite the banking regulator not having issued a formal notice of loosening the restrictions imposed at the peak of the Covid-19 crisis.
This is in tune with global trends where regulators in the US, Europe and Australia have lifted their curbs on dividends.
Kenyan banks’ attractive dividend yields are a big attraction for investors, especially foreigners, in what has made the stocks together with Safaricom to be key drivers of the Nairobi Securities Exchange (NSE) .
The NSE-listed banks nearly halved their dividend payouts in 2020 to Sh17.1 billion from Sh31.7 billion a year earlier. The dividend declined over the two years from 2018’s peak of Sh40.5 billion.
The dividend cuts came as lenders sought to preserve cash amid rising defaults and increased provision for bad debt in the wake of the Covid-19 pandemic.
Credit: Business Daily
