Equity Group CEO James Mwangi and his NCBA counterpart John Gachora earned a combined Sh362.37 million last year on increased salary and bonuses, signalling increased pay for top executives in the banking industry on the back of double-digit growth in profits last year.
Mr Mwangi’s earnings jumped 49 percent to Sh213.64 million, including a Sh53 million bonus, having missed out on the incentive pay in 2021, regulatory filings show.
The bonus payout comes in a year Equity posted a 15 percent rise in profits to Sh46.1 billion in a performance that cut across Kenya’s banking industry.
The profit boom, which saw NCBA Group’s profits rise 35 percent to Sh13.78 billion, earned Mr Gachora a pay rise of 87.7 percent to Sh147.73 million, including a bonus of Sh40 million, after missing the performance-linked reward for two years in a row.
Central Bank of Kenya data show Kenya’s banking sector pre-tax profits hit a record Sh244.1 billion last year, reflecting a growth of 25.3 percent on increased lending in Kenya’s recovering economy.
Increased profits prompted another year of dividend windfall for investors, with banks such as KCB, Equity, Absa Kenya and Standard Chartered Bank Kenya that had cut or frozen payouts in 2020 due to Covid-19 disruptions having resumed or increased payouts from last year.
Listed banks propose to distribute to shareholders between 16 percent and 69 percent of their net earnings, in the latest indicator that they have turned the corner on Covid-19 disruptions that saw banks cut or freeze payouts.
The profit boom also sets the stage for bonus payments to bank executives in a sector known to pay higher rewards to top managers.
Cooperative Bank of Kenya, KCB Group and Standard Chartered Kenya look set to join in the bonus bonanza for CEOs, with their profits having risen by 33 percent, 19.5 percent and 38 percent respectively.
Most banks have now built surplus capital after the cash-preservation stance taken in 2020 and 2021 when they froze or cut dividend payout to shareholders and skipped bonuses to executives as profits fell.
Nine tier 1 banks—Equity, KCB, Cooperative Bank of Kenya, NCBA, DTB, Stanbic Bank of Kenya, Absa Bank of Kenya, Standard Chartered Bank of Kenya and I&M— saw their net profits rise by 25.2 percent or Sh35.8 billion to Sh176.86 billion.
The remuneration policies of many banks provide for performance-based pay, where the board sets targets for the CEO and other executive directors and then pays a bonus when this is achieved or exceeded.
The bonus is in addition to the fixed pay, pension and other benefits.
For instance, Mr Mwangi who has for the third straight year led Equity in posting profits above its closest rival KCB, was rewarded with a 35.9 percent salary rise to Sh106 million and added Sh53 million bonuses after having missed out in 2021.
His bonus in 2020 was Sh4.73 million, indicating the payout rose 11 times. Mr Mwangi is set to receive Sh685.3 million in dividends for his direct 4.54 percent stake in Equity.
NCBA’s Mr Gachora was rewarded with a 38 percent salary rise to Sh89.64 million and given Sh40 million bonus— the first since the Sh38.47 million he was paid in 2019.
The increased pay to Mr Gachora came in the year he guided the bank to a record Sh13.78 billion net profit.
The pay and bonuses of CEOs in listed banks look set to topple their payout of pre-pandemic year when the performance rewards jumped 94 percent or Sh298.68 million to reach Sh615.97 million.
In 2020, most executives had reduced or zero bonuses in the wake of Covid-19 economic hardships, which triggered losses, layoffs and business closures.
Only a few of the executives were in 2021 rewarded with bonuses larger than their 2019 awards despite profit growth.
Cooperative Bank CEO Gideon Muriuki in 2021 earned the largest bonus of Sh266.4 million, followed by then KCB boss Joshua Oigara with Sh251.1 million.
The Standard Chartered Bank of Kenya and Absa Bank Kenya CEOs could be in for increased pay given that they have delivered profits above the 2021 levels when their bonuses were Sh47.9 million and Sh40.6 million respectively.
The net profit of Standard Chartered Bank of Kenya grew by 38 percent to Sh12.44 billion while that of Absa Kenya increased by 34.2 percent to Sh14.6 billion.
Banks last year benefited from increased growth in interest income as they stepped up the pace of lending in line with the continued recovery of economic activities.
Increased lending and upward review of loan prices have helped lenders book more interest income while aggressive loan recoveries have saved them from the sharp elevation of loan defaults.
CBK data show the weighted average lending of 33 out of the 39 commercial banks had increased by December last year, when compared with the average rates for June.
Many lenders have been revising the rates upwards to reflect the risk profile of customers, with some taking the rates as high as 20 percent, partly on the decision by the CBK to increase the benchmark lending rates.