NCBA crafts new generous dividend payment policy


NCBA branch in Nairobi. FILE PHOTO | NMG

NCBA Group plans to pay up to 50 percent of net earnings as dividends going forward, indicating increased returns to shareholders for a bank that previously kept its cash distributions at 20 percent of net income.

The Nairobi Securities Exchange-listed lender said it now targets to set a dividend policy of paying 35 percent to 50 percent of profits in a policy that also takes into account capital investment requirements.

The dividend policy comes after the bank emerged from the amalgamation of the former CBA Group and NIC Group --which previously did not have a formal dividend policy but had a tradition of paying a fifth of net income to shareholders.

The Nairobi Securities Exchange-listed firm has proposed an interim dividend of Sh2 per share for the half year ended June when most other listed banks suspended payouts citing new uncertainties brought by rising inflation, weakening shilling and disputed presidential elections.

“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.

“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.”

Some of the top investors that will benefit from NCBA's more generous dividend policy include the families of Jomo Kenyatta, Philip Ndegwa, Simeon Nyachae, and Naushad Merali.

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.

Previously, banks used to pay dividends regularly, maintaining or enhancing the distributions year-on-year. NCBA's interim dividend of Sh2 per share translates to a total payout of Sh3.29 billion and comes after a 67 percent jump in net profit for the half-year period to Sh7.77 billion.

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