Barclays dividend drops by a third as profit falls 13pc

Barclays Kenya has cut interim dividend by a third after the bank announced a 13 per cent drop in half-year net profit, weakened by a one-off payment for early retirements.

The lender will pay an interim dividend of Sh0.20 a share compared to the Sh0.30 it paid last year as lower income from lending to homes and companies further hit.

The net profit stood at Sh3.73 billion compared to Sh4.23 billion in the same period earlier, which was lower compared to rival banks.

Barclays Kenya may have grown six per cent in the period after excluding the Sh788 million voluntary retirement cost compared to double digit growth by rivals Equity Bank and National Bank that were up 16.7 per cent and 15.8 per cent respectively in the period to June.

“We’ve consistently paid interim and final dividends and this drop is due to the one-off restructuring expense which will help us manage our staff costs,” said Jeremy Awori, CEO of Barclays Kenya. “We also note the importance of reserving cash to maintain our core capital ratios in line with the regulator’s prudential guidelines.”

The dividend pay of Sh0.20 is the lowest in two years, having paid a similar amount in the first half of 2011. It paid an interim dividend of Sh0.75 in 2010, the highest in the past five years.

Barclays share Tuesday dropped to Sh17.30 from Monday’s close of Sh17.45 and has shed 2.13 per cent over the past month.

Although the bank is one of the oldest in the country, its earnings have grown at a slower pace than its rivals in recent years, as its model of focusing on wealthier clients was challenged by home-grown lenders like Equity and Cooperative Bank.

READ: Equity, Co-op banks feature on global list of top lenders

Foreign subsidiaries are also helping banks like KCB and Equity widen the performance gap against Barclays, which cannot open shop in the neighbouring countries of Tanzania and Uganda where its parent company has operations. The bank is owned and controlled by Barclays Plc.

Mr Awori forecasts a better second half performance, helped by the peaceful March 4 presidential elections and a more stable economic environment.

“The current macroeconomic environment provides a better opportunity for growth in the second half,” he said.

Political uncertainty in the run-up to the elections saw investors shelve their growth plans, forcing the volume of new loans issued to drop by Sh10 billion to Sh40 billion in the first quarter.

But Barclays Kenya’s loan book dropped to Sh107 billion in June compared to Sh108.2 billion in March, a pointer that the bank slowed down its lending in quarter two compared to the first quarter when its net advances grew by Sh4 billion.

Mr Awori said the bank is seeking to deepen its SME lending and investment banking as well as venture into bancassurance— where it sells insurance products through its banking halls.

READ: Barclays Bank eyes deal making and insurance market

The bank—which has a heavy presence in corporate and retail lending—is seeking to adopt the financial supermarket status which includes arranging corporate deals, selling insurance products and offering loans.

This is in line with Barclays Africa’s strategy of pushing its continental operations with focus on corporate banking and bancassurance.

Analysts reckon that the reorganisation of Barclays Africa business will deepen its product innovation.

“The integration of Barclays Plc’s African operations into Absa will support creation of a common platform to drive product innovation to meet the needs of an increasingly sophisticated African customer base,” said Standard Investment Bank Tuesday in a brief to their clients.

South Africa’s Absa would take control of Barclays Plc’s Africa’s operations including its 68.5 per cent stake in the Kenyan unit in a share swap deal.

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