Barclays dividend drops by a third as profit falls 12.7pc

Barclays Bank of Kenya has cut dividend by a third after the lender announced a 12.7 per cent drop in full-year profit, weakened by high costs and provisions for bad loans.

The bank will pay a final dividend of Sh0.50 on top of the interim offer of Sh0.20, pushing the total to Sh0.70, down from Sh1 per share it paid in 2012 and Sh1.50 in 2011.

The net profit stood at Sh7.62 billion compared to Sh8.74 billion in the same period earlier. Other top banks are likely to perform better, given that the industry’s earnings collectively grew 16.8 per cent last year.

Barclays, which is the first top bank to announce 2013 results, expects growth in lending additional revenue streams, such as insurance products and investment banking business, would boost earnings in 2014.

Jeremy Awori, CEO of Barclays Kenya, attributed the cut in dividend to the lower profits and the need to build capital in line with new central bank demands.

“The drop in dividend pay is due to reduced profitability but still represents a 50 per cent payout ratio,” said Mr Awori Thursday.

“We also need to keep capital to prepare for January 2015 when new CBK regulations come into place,” he said.

Central Bank of Kenya requires lenders to maintain a minimum capital to total risk weighted assets ratio at 14.5 per cent, up from the current 10.5 per cent.

Barclays’ ratio dropped to 16.6 per cent last year from 22.7 per cent in 2012 on the faster growth of its assets, which grew to Sh207 billion from Sh185 billion.

The bank’s shares Thursday dropped 2.1 per cent to Sh16.60 and have shed 3.6 per cent over the past month, a period that has seen top banks like KCB, Equity Bank and Co-operative Bank shed value at the Nairobi bourse.

Provisions for bad loans jumped to Sh1.22 billion from Sh144 million in 2012 while its expenses, including the Sh788 million voluntary retirement costs, increased by Sh2.38 billion to Sh16.7 billion.

The bank said the eight-fold jump in provisions was because of a one-off recovery of bad debt worth Sh1 billion in 2012 that was not repeated in 2013.

READ: Barclays dividend drops by a third as profit falls 13pc

Demand for loans was curbed in the first half of 2013 due to uncertainty surrounding the March 4 polls, after the previous election in 2007 was marred by violence.

Barclays Kenya’s loan book grew to Sh118 billion in December compared to Sh104.2 billion the same month a year earlier, but income from loans remained static at Sh14.8 billion on lower lending rates.

This marked a shift from years of negative or flat growth.

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 Co-operative Bank.

The bank has created an SME unit from its corporate banking unit to increase lending to small and medium businesses.

“We see SMEs as a growth potential and revenue stream moving forward. Historically, we’ve not been playing in the SME field,” Mr Awori said.

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

The bank 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.

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