Standard Chartered Bank Kenya opted not to pay shareholders an interim dividend for the six months ended June despite recording a 10.9 percent jump in net profit to Sh5.41 billion, pointing to banking sector concerns about the economy due to external shocks that have raised inflationary pressure in the country.
The tier one lender paid the highest dividend per share of any bank in the year ended December 2021 at Sh19, which comprised an interim payout of Sh5 and a final dividend of Sh14 per share.
It has been rewarding shareholders with a mid-year interim payout of between Sh4.50 and Sh6 per share since 2016, except in 2020 when lenders were generally held back from paying dividends due to the negative effects of the Covid-19 pandemic on the industry.
“We have delivered a strong financial performance in the first half of the year. However, external conditions remain difficult to predict, as we have seen geopolitical and macroeconomic volatility that has adversely impacted the global economic environment,” said Stanchart in a statement on Tuesday.
“Inflationary pressures are being felt in the Kenyan economy and this is likely to impact both individuals and companies more severely in the second half of the year. In addition, the impact that the General Election that is about to be concluded had on the economic environment should ease.”
At the Nairobi Securities Exchange (NSE), the lender’s share price retreated by 4.3 percent to Sh133.75 in trading on Tuesday, indicating that investors were factoring in the lack of an interim dividend from one of the bourse’s key dividend stocks.
The improved profitability was driven by a 9.8 percent rise in net interest income to Sh10.01 billion, while non-funded income was up by 9.8 percent to Sh5.54 billion after a sharp increase in revenue from foreign exchange trading from Sh1.7 billion to Sh2.27 billion.
The growth in the bank’s net interest income came despite its loan book shrinking by Sh1.76 billion to Sh128.52 billion and its portfolio of government securities rising by just Sh2.8 billion to Sh103.56 billion.
The lender relied on a fall in interest expenses on customer deposits by 23 percent or Sh400 million to Sh1.34 billion to boost net interest income, pointing to either access to cheaper funds or a cut in the interest it paid on existing deposits.
StanChart’s operating expenses rose by 9.5 percent to Sh7.99 billion in the period, partly due to staff costs rising by Sh368 million to Sh3.58 billion.
Going by its 2021 full-year dividend of Sh19 whose payout was made in May, the lender currently carries one of the highest dividend yields in the stock market at 14.2 percent, trailing only the NSE at 17.5 percent.