Bank shareholders primed for bumper dividend payouts

Banks needed just seven months this year to earn the profits they made the whole of last year, new data shows.

And now they are promising shareholders bumper dividends as the year closes.

Investors last year had to contend with dividend freezes or cuts as banks, unsure of the extent of the Covid-19 economic fallout, went into cash preservation mode. The mood has since changed.

Traditional dividend payers such as KCB, Equity, Co-operative Bank of Kenya and NCBA are all promising to distribute part of the profits to shareholders.

This is welcome news for shareholders given that lenders were the most consistent and largest dividend payers among listed firms—besides Safaricom—before coronavirus disrupted the pattern.

The planned dividend payouts are on the back of Central Bank of Kenya (CBK) data that shows the banking sector’s pre-tax profit from Kenyan operations rose by 63.1 per cent to Sh145.48 billion in the nine months to September.

The profits had by July overtaken the Sh112.8 billion that the lenders made the whole of 2020.

The nine-month earnings also surpass the pre-pandemic levels.

Now industry executives are confident that investors will be in for increased dividend payouts when the lenders release their full-year results in March next year.

The sentiments are motivated by higher earnings, increased loan repayments and reduced economic uncertainty following the lifting of Covid-19 containment measures, including curfews and lockdowns.

NCBA Group Chief Executive John Gachora last week announced a 2.6 times jump in the bank’s nine-month net profit to Sh6.52 billion, pledging to pay dividends.

“Our dividend frequency has been to pay an interim and final dividend, we don’t intend to change,” he said.

“And if we continue with this performance, which I think we will, I don’t see the reason why the board will not recommend a dividend at the end of the year.”

The lender in October paid Sh0.75 per share, amounting to Sh1.24 billion as an interim dividend.

Mr Gachora said the uncertainty brought about by Covid-19 had cleared, and now “we have a good view about 2021 and where it is going,” raising prospects for a final dividend payout.

NCBA will join Equity Bank, which is also expected to end a two-year dividend freeze as profits soar.

The lender, which saw its third-quarter net profit rise 78.6 per cent to Sh26.8 billion, in July approved a policy that will guarantee a dividend payout of between 30 per cent and 50 per cent of its net profits every year.

This means that shareholders, whose last dividend was in 2018 when they took home Sh7.54 billion, are set for a higher payout going by the current profit.

KCB Group is also in the race for a final dividend, adding to the Sh1 per share interim dividend - total Sh3.2 billion - that shareholders will receive by mid-January 2022. 

The interim payouts came after KCB’s net profit rose by 131.1 per cent to Sh25.1 billion in the nine months ended September.

Chief Executive Joshua Oigara said a full-year payout is almost guaranteed.

“I cannot commit on a dividend number at this stage, but I think the momentum is that we are looking at our final dividend as full-year results come out,” he said.

Co-operative Bank of Kenya shareholders are also likely to enjoy another year of dividends following an 18.9 per cent rise in the lender’s nine-month net profit to Sh11.6 billion.

The bank last year maintained a Sh5.86 billion dividend payout despite full-year net profit declining by 24.4 per cent on increased provisions for loan defaults.

Absa Bank Kenya, which saw its nine-month net profit more than quadruple to Sh8.24 billion, is also set to distribute part of the profits to shareholders.

Its latest earnings are above the Sh4.16 billion net profit posted in the full-year ended December last year and the Sh7.47 billion it posted in 2019 before the pandemic set in.

The lender, which froze dividends last year as profits fell 44 per cent, said it is now confident it will resume payments for the full year.

“We are con?dent to resume dividend payment for the ?nancial year 2021,” said Managing Director Jeremy Awori, citing a positive business performance outlook.

Standard Chartered Bank Kenya shareholders are also set for a Christmas holiday liquidity boost after the lender announced a Sh5 per share interim dividend totalling Sh1.89 billion.

Stanchart’s payout, set for not later than December 29, comes in the wake of a 47 per cent rise in net profit to Sh6.35 billion.

Stanbic Holdings, which in September paid an interim dividend of Sh1.70 per share amounting to Sh672.05 million, looks set for a final payout after its nine-month earnings maintained an upward trend.

DTB and I&M last year froze payouts and reduced distribution to shareholders respectively, but are also set to loosen their purse strings following the continued recovery on earnings.

Banks navigated a difficult period of mounting loan defaults and slow economic activities after the first Covid case was reported in March last year.  

palushula@standardmedia.co.ke