The super profits announced by Kenya’s banking sector have earned individuals with significant shareholding in listed lenders millions of shillings in dividends.
The sector’s profitability touched a new high, buoyed by increased uptake of loans and wider interest spread, paving the way for 23.5 per cent growth in pre-tax profits to Sh98.8 billion in the year to November.
The strong performance saw bankers reward shareholders with higher payouts, with some like NIC Bank doubling their dividend to Sh1 a share while Equity Bank increased its payout by 25 per cent to Sh1.25.
Top on the list of the highest dividend earners are Equity Bank chief executive James Mwangi with a payout of Sh159.5 million, Sunil Shah, a director at KCB (Sh137.3 million).
Among the top earners is the family of the late Central Bank of Kenya governor Phillip Ndegwa who set to take home Sh98.6 million from their 98.6 million shares in NIC Bank up from Sh22.3 million last year.
Other major beneficiaries of the dividend boom include Equity Bank’s Andrew Mwangi (Sh113 million), family of the late Nelson Muguku (Sh61.7 million) and Co-operative Bank chief executive Gideon Muriuki (Sh37.6 million).
“The dividend payout was a reflection of the good performance last year. Save for Barclays all the listed banks exceeded their 2011 dividend payout,” said an analyst at Kestrel Capital. “Banks performed well despite the threats from high interest rates and inflation.”
Barclays cut its dividend to Sh1 from 2011’s Sh1.50 despite increasing its net profit by 7.4 per cent to Sh8.7 billion.
Analysts attributed the growth in the bank’s profit to on the higher interest margins — the gap between interest returns paid to depositors and what the lenders charged borrowers for the same cash. The lenders are expected to have crossed the Sh100 billion pre-tax earnings mark last year.
These profit figures make banking Kenya’s most dominant economic sector, underlining its ability to ride out uncertain economic times characterised by currency, inflation and interest rates volatility.
At least 10 listed companies have issued profit warnings, an indication that their performance for last year would be at least 25 per cent lower than the 2011 results.
Increased lending and expensive credit has lifted the bankers’ profits with most of them defying double-digit inflation and lending rates in the fourth quarter.
The Kenya Commercial Bank emerged as the most profitable lender last year with a 11.9 per cent rise in net profit at Sh12.2 billion while Equity bank came second with a 16.5 per cent rise to Sh12 billion.
It is this performance that has seen investors rush to accumulate bank stocks, which have emerged among the top performers at the Nairobi Securities Exchange.
For instance, Equity Bank and KCB shares have gained 29 and 39 per cent respectively over the past three months — further enhancing the worth of the individual shareholders.
The stake of Mr Shah at KCB is now worth Sh2.77 billion while of Equity Bank’s chief executive has seen the value of his direct stake increase to Sh3.82 billion.
For Mr Mwangi, the increase in the worth of his shares comes in period when he has sold stocks worth Sh1.6 billion over the past three years at the end of a two-year-lock-in period for anchor shareholders that were attached to its listing at the Nairobi Securities Exchange in 2006.
He said the disposal were dictated by regulations barring an executive director of a bank from holding more than five per cent of the institution’s capital.
Since Equity Banks debut at the NSE on August 7, 2006, the share has appreciated by more than 900 per cent (share splits and bonus stocks taken into account) — turning its owners, including employees, directors and founders into multi-millionaires.
NIC Bank share has gained 28 per cent in the three months, pushing the worth of the Ndegwas’ ownership to Sh4.82 billion. Co-operative Bank’s share has risen 22.3 per cent in the period.