Barclays Bank of Kenya has defended its decision to reduce the dividend payout during the year financial year ending December 31, 2013. Board chairman Francis Okemo-Okello said the bank had to retain part of the earnings to meet the new Central Bank of Kenya (CBK) guidelines on the minimum capital base.
The bank paid an interim dividend of 20 cents per share last year and will make a final payout of 50 cents per share, bringing the total to 70 cents per share, which the shareholders approved.
During the bank’s annual general meeting in Nairobi yesterday, Okemo argued that the reduced dividend payout was to enable the bank have a high buffer capital and comply with CBK’s new capital regulations.
“To meet the capital ratio, we had to retain some of the profits to avoid a situation where we would have to increase the paid up capital through a rights issue,” he argued.
In 2011, the bank made an interim dividend of 20 cents per share, final dividend of 70 cents per share and a special dividend of 60 cents per share, bringing the total earnings per share to Sh1.50. In 2012, the company paid a final dividend of Sh1 per share and Sh1.50 in 2012.
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The decline in dividend follows the drop in the company’s full-year profit of Sh7.62 billion compared to Sh8.74 billion in 2012.
Okemo told shareholders that it was a prudent decision as the bank embarks on a strategy to improve profitability. “We have to plan and invest in a sustainable future performance by ensuring that the bank is sufficiently capitalised,” he stated. Shareholders were concerned that despite the market registering good dividends, this was not reflected in the bank.
“This is among the largest banks in the country and the decision to reduce dividends is depressing to the shareholders,” argued an investor referred to as Mzee Wahome.
Managing Director Jeremy Awori however said the bank had embarked on a new strategy following the restructuring last year that saw voluntary job cuts. This saw the bank register a cost income ratio of 56 per cent, which shareholders argued was high compared to other market players.
“Besides, we are opening new branches, and investing in technology and innovations so that we are not left behind,” said Awori. “However, we must give the bank time to register improved performance following the decision we made in 2013. We are in a growing mode,” he added.
During the meeting, Okemo and Rose Ogega were re-elected to serve on the board for another term.