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Capital Markets

Kenya’s billionaires club sees fortunes rise in NSE windfall

From Left: JAMES MWANGI (Equity Bank); JAMES NDEGWA (ICEA Lion Group) and SUNIL SHAH (KCB Foundation). File
From Left: JAMES MWANGI (Equity Bank); JAMES NDEGWA (ICEA Lion Group) and SUNIL SHAH (KCB Foundation). File  

A group of billionaire investors have entered a dividend windfall season riding on last year’s record profits by companies listed on the Nairobi Securities Exchange (NSE) companies, the latest financial reports indicate.

High-level profitability, the highest since the 2008 global financial crisis, have seen many of the blue chip companies raise their dividend payouts, adding millions of shillings to the take-home of top shareholders.

The club of shareholders set to rake in millions of shillings from their investments in the listed firms includes Sunil Shah, Equity Bank chairman Peter Munga and the family of former Central Bank of Kenya governor Phillip Ndegwa.

The list also includes a select group of CEOs with big stakes in companies they manage: Bharat Thakrar of Scangroup, Equity Bank’s James Mwangi, Gideon Muriuki of Co-op Bank and Benson Wairegi of British American Investment Company (Britam).

Besides the dividend harvest, these investors have seen their paper wealth rise significantly as share prices rose by double digits in the past six months.

“There has been a significant improvement in dividends declared because of last year’s good performance,” said Eric Musau, an analyst at Standard Investment Bank.

Mr Musau reckons that banks — which benefited from high interest rates — topped the list of corporate generosity to shareholders followed by a few manufacturers such as British American Tobacco.

James Mwangi, the Equity Bank chief executive, tops the list of dividend harvesters with a take-home of Sh159.5 million for his 3.45 per cent stake in the bank that is paying its owners Sh1.25 a share for the year ended December 2012.

The payout represents a 25 per cent increment from the previous year’s Sh1 per share. Mr Mwangi is also one of the wealthiest individual investors at the Nairobi bourse with 27.6 million shares in Equity Bank currently worth Sh4.2 billion.

Equity Bank chairman Peter Munga takes home Sh28 million for his 22.4 million shares in the bank where his stake is now valued at Sh745.3 million.

In the past couple of years, Equity Bank founders, including the family of the late Nelson Muguku, have reduced their stake in the bank, harvesting billions of shillings in the process.

Equity, however, remains one of the most profitable firms at the NSE whose dividend payout policy amounts to millions of shillings for top owners.
The bank posted the second largest net profit of Sh12 billion last year compared to Sh10.3 billion the year before, representing a 16.5 per cent growth.

KCB topped the profitability chat with Sh12.2 billion compared to Sh10.9 billion in 2011, allowing its top investors to earn millions of shillings in dividends.

Sunil Shah — the biggest individual shareholder at KCB — will earn Sh107.3 million for his 56.4 million shares in the bank that raised its dividend payout to Sh1.9 per share from the Sh1.85 the previous year. The 56.4 million KCB shares held by Mr Sunil are currently worth Sh2.3 billion, putting him firmly in the club of Kenya’s paper billionaires.

Fellow investors in KCB Kanaksinh Karsandas and Sandip Babla are set to earn a combined dividend of Sh91.9 million for their ownership of 48.3 million shares in Kenya’s biggest bank. The value of the two little-known investors now stands at Sh1.9 billion.

The Ndegwa family, which is among the top shareholders at NIC Bank, is set to earn Sh135.7 million for the 24.9 per cent stake besides the rise in their paper wealth to Sh7 billion based on the lender’s share price of Sh52.

The family, which has a 25 per cent shareholding in the bank – the maximum individuals are allowed in banking institutions – has defended that position by taking up its full rights in the past rights issues. NIC posted a net profit of Sh3 billion last year compared to Sh2.7 billion the year before.

Co-op Bank’s chief executive Gideon Muriuki remains in the list of top dividend harvesters with a total of Sh30 million for his 1.4 per cent stake in the lender where his shareholding is currently valued at Sh980.3 million.

Co-op Bank’s net profit rose 45.2 per cent to Sh7.7 billion last year compared to Sh5.3 billion in 2011, helped by robust growth in interest income.

The bank’s stellar performance is linked to the high interest rate environment that widened interest margins against the backdrop of minimal loan defaults, helping the lenders to grow profit even as new borrowings slowed down.

KCB, Equity, Barclays and Co-operative Bank’s loan books expanded by 5.2 per cent to 19 per cent last year but their interest income rose by a wider margin of 8.8 per cent to 66 per cent culminating in higher profits.

KCB said its interest margin stood at 10.9 per cent last year, up from 10.1 per cent in 2011 while Equity Bank’s interest margin rose to an all-time high of 13 per cent in the quarter ended December 2012.

Commercial banks raised their lending rates to above 24 per cent last year compared to an average of 14 per cent in 2011, earning them higher returns on new and old loans that were re-priced upwards.

The lenders raised their interest rates in reaction to the Central Bank’s decision to tighten liquidity in response to runaway inflation in the last quarter of 2011.

The financial results released last month show that investors in other services companies are also on the road to a dividend boom, promising the top shareholders millions of shillings in dividend earnings.

The list of top dividend earners in non-bank firms includes Scangroup’s CEO Bharat Thakrar who is set to earn Sh31 million for his 18.19 per cent stake in the company.

This is despite the fact that the marketing services firm cut its dividend payout to Sh0.6 from Sh0.7 per share in 2011 on reduced profits.

Scangroup’s net profit dropped to Sh752 million in the year ended December compared to Sh911.1 million the year before on what the firm attributed to setup costs in West Africa.

Mr Bharat’s stake in the company is now valued at Sh3.7 billion after a 23.2 per cent rise in the stock price to Sh72. The stock market, which has rallied since January, has proven itself as a key route to wealth, especially for investors with millions of shares.

The benchmark NSE 20 Share Index gained more than 200 points after the March 4 election to stand at 4861 on Thursday. Weekly trading volumes have dropped since the election in what analysts attribute to illiquidity caused by sustained demand for shares.

“We have not seen a change in demand for shares. What is happening is that most investors are holding their stocks and this has seen a drop in trading volumes,” said Francis Mwangi,” an analyst at Standard Investment Bank.

Mr Mwangi reckons that the sharp rally in the equities market despite the election season is a signal of the faith investors have in the market as a profitable investment option.

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