State-controlled National Social Security Fund (NSSF) bought an additional 18.8 million shares worth Sh703 million in listed tier-one lender KCB Group in the third quarter of this year, the latest in a series of incremental purchases.
KCB disclosed in regulatory ownership filings that the NSSF raised its ownership to 291.35 million shares in the bank at the end of September equivalent to a stake of 9.07 percent, up from 8.48 percent in June.
The stake is now valued at Sh10.9 billion, going by the lender’s latest share price of Sh37.4 per unit, up from Sh10.19 billion in June.
The NSSF has been steadily increasing its stake in the lender and other large blue chips at the Nairobi Securities Exchange (NSE), eyeing its stable fundamentals and regular dividend payments that complement investment income from government securities.
The pension fund is the biggest local institutional investor in the stock market, holding significant stakes in multiple firms directly and through its appointed fund managers.
The NSSF held a 6.12 percent ownership in the KCB in March 2019 and has been raising it from the purchase of more shares besides the transfer of its previous stake in the National Bank of Kenya (NBK) into shares of the country’s second-largest lender.
The bank, alongside Safaricom, provides the pension fund with its biggest source of dividend income, owing to the large volume of shares held in the two companies.
The fund’s latest audited financials covering the year to June 2021 show that KCB and Safaricom earned it dividends of Sh265.7 million and Sh337.7 million in the period respectively.
A year earlier, NSSF had earned Sh773.6 million in KCB dividends, and Sh962 million from Safaricom, with the dip in 2021 caused by many firms opting to reduce or avoid dividend payouts to conserve capital during the Covid-19 pandemic.
This year, KCB has paid its shareholders a cumulative Sh3 per share in dividend—in relation to the financial year ended December 2021— rewarding NSSF with more than Sh800 million for its stake in the lender.
The NSSF’s increased investment in KCB comes as banks, in general, are posting strong profit growth after recovering from the impact of the Covid-19 pandemic, which caused a sharp increase in defaults and provisions early on.
The bank’s net income jumped by 27.5 percent to Sh19.5 billion in the half-year that ended June 2022, keeping it on pace to beat last year’s record net earnings of Sh34.09 billion.
The lender has also been shoring up its future growth prospects by lining up new acquisitions in the region.
The bank last year acquired a 62.06 percent stake in Rwanda’s Banque Populaire du Rwanda Plc (BPR) from Atlas Mara, expanding in that market where it was already running a subsidiary (KCB Bank Rwanda).
It has also recently announced an agreement to acquire an 85 percent stake in DRC’s Trust Merchant Bank for an estimated Sh17.9 billion, a deal it expects to close by the end of the year after having received shareholder approval for the transaction.