The Philip Ndegwa family has bought an additional 10 million shares in NCBA Group worth Sh296 million, boosting their stake in the lender whose profitability has improved significantly.
Regulatory filings show that the Ndegwas’ investment vehicle First Chartered Securities raised its holdings of the bank shares to 216.2 million equivalent to a 13.13 percent stake as of August 8.
This was up from 206.2 million shares held as of December 31, 2021, and which amounted to a 12.52 percent interest in the Nairobi Securities Exchange-listed firm.
The increased share purchases have seen First Chartered close in on the stake held by Enke Investments Limited –with a 13.2 percent stake and which is owned by the Jomo Kenyatta family.
First Chartered acquired the additional stock in a period when the share price traded at a range of between Sh24 and Sh27, according to market data. The stock set a new 52-week high of Sh29.6 on Thursday as investors responded to the announcement of an interim dividend of Sh2 per share payable at the end of this month.
NCBA has reported higher profitability and improved efficiency since it was created from the 2019 merger of the former NIC Group and CBA Group.
The bank’s net income surged 66.8 percent to Sh7.7 billion in the half-year ended June, helped by higher non-interest income including revenue from foreign exchange trading.
The growth in profitability saw NCBA’s return on equity (ROE) –a measure of efficiency— rise to an annualised 19.3 percent in the review period. The bank’s return on the shareholder funds stood at 12.5 percent a year earlier.
As standalone banks prior to the merger, NIC and CBA had an ROE of 11.8 percent and 16.3 percent respectively in the year ended December 2018.
The merged entity has resulted in a reduction of costs and accumulation of scale, with the lender also aggressively expanding its digital banking offerings in the local and regional markets.
NCBA has announced a more generous dividend policy of paying out 35 percent to 50 percent of profits, reversing its previous conservative stance that kept cash distributions at a fifth of net income.
“Certainly, one of the things we look at is how much capital we need for the next year of investments. Our planning session is September/October and as we go into that some of the things we shall look at are what investment we need to make for our subsidiaries, investment banking, and products,” NCBA chief executive John Gachora said recently.
“And these are decisions we take into consideration to determine how much we shall be able to pay our shareholders as far as dividends are concerned. For a percentage cap, it shall be somewhere between 35 percent and 50 percent of profits.”
NCBA is the latest to develop a dividend policy after Equity Group said it will be distributing between 30 percent and 50 percent of net income.
The outbreak of the Covid-19 pandemic and subsequently the economic fallout from the Russia-Ukraine conflict has caused erratic dividend payouts, leaving investors less sure of income from their stocks portfolio.