The families of Jomo Kenyatta and former Central Bank of Kenya Governor Philip Ndegwa and Equity Group chief executive James Mwangi are among the top beneficiaries of the combined Sh63 billion dividends that Kenya’s listed banks are set to pay.
The Kenyattas are set to receive Sh924.26 million for their combined 13.2 percent stake in NCBA Group, which has proposed a payout of Sh4.25 per share, up from Sh3 a year earlier. The Kenyattas received Sh652.5 million in dividends last year.
The Ndegwas will earn Sh876 million on their 12.52 percent ownership in the same bank, which was created following the merger of the former NIC Group and CBA Group.
Mr Mwangi, who owns a 3.4 percent direct stake in Equity, has cemented his position as the biggest individual dividend earner with a payout of Sh685.3 million after the bank declared a dividend of Sh4 per share.
This amount is higher than the annual net earnings of more than a third of NSE-listed firms, underlining the impact of Equity’s profitability and the size of Mr Mwangi’s stake in the bank.
His 188.6 million shares in Equity currently have a market value of about Sh8.3 billion, marking one of the single-largest investments in a publicly traded firm by an individual.
The Kenyattas’ stake in NCBA stood at Sh7.6 billion based on the bank’s share price of Sh35 a piece while the Ndegwas’ ownership is worth Sh7.22 billion.
The dividend boom is replicated across the industry, with most banks having reported the full-year results indicating double-digit profit growth and surplus capital as loan defaults fell and lenders upped lending.
The nine tier-one banks, including 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.
Central Bank of Kenya (CBK) data show the banking sector’s pre-tax profits hit Sh244.1 billion last year, translating to a 25.3 percent rise from Sh194.8 billion posted the previous year.
The rise in profits has seen the banks propose to distribute to shareholders between 16 percent and 69 percent of their net earnings, in the latest indicator that lenders have turned the corner in the wake of Covid-19 disruptions that saw the lenders cut or freeze payouts.
“We feel confident to recommend a much-enhanced dividend payout as we have over the years built sufficient capital buffers and retained earnings, in addition to the sustained profitability of our business,” said Co-operative Bank CEO Gideon Muriuki, whose bank raised dividends 50 percent.
Like Mr Mwangi, Mr Muriuki owns a significant stake in the bank he has shepherded for more than two decades.
He will pocket Sh154 million from his 1.75 percent stake in Co-op Bank, up from Sh102.68 million, after it raised dividends to Sh1.50 per share, underlining his position as one of Kenya’s wealthiest CEOs.
The bank reported a 33 percent jump in net profit to Sh22 billion last year.
Equity, Kenya’s most profitable bank, grew its profit 15 percent to Sh46.1 billion, allowing the lender to raise its dividend from Sh3 to Sh4 per share, amounting to Sh15.1 billion.
Equity did not pay dividends for 2019 and 2020, citing the need to build a capital buffer after the Covid-19 economic hardships hit the banking sector via loan defaults.
NCBA’S net profit grew 35 percent to Sh13.78 billion and offered shareholders 50.8 percent of the earnings as dividends or Sh7 billion.
The Ndegwas own a 12.52 percent stake in the bank through First Chartered Securities Limited, with the family having split the ownership among the siblings.
Andrew Ndegwa will get Sh301.08 million in dividends for his 4.3 percent stake while James Ndegwa, who holds 4.23 percent, will earn Sh296.18 million.
The profit boom also sets the stage for bonus payments to bank executives in a sector known to pay higher rewards to top managers.
The dividend bonanza comes on the back of continued economic recovery that has seen banks expand lending and stem growth in non-performing loans.
Increased lending and upward review of loan prices have helped banks to book more interest income while aggressive loan recoveries have saved them from a sharp elevation of loan defaults.
The rise in profits came despite banks having missed out on fees and commissions charged on money transfers between banks and mobile money wallets following the freeze by the CBK in 2020.
The fees were, however, reinstated early this month.
The lenders charged between Sh30 and Sh197 before the waivers were introduced in mid-March 2020 but most of them have reviewed the charges downwards amid pressure from the CBK and customers.
The reinstatement of the charges looks set to offer tailwinds to banks’ earnings given that they have been missing out on billions of shillings.