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Equity, Co-op CEOs earn millions from bank profits

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EQUITY BANK CEO JAMES MWANGI. FILE PHOTO | DIANA NGILA | NMG

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Summary

  • Most Kenyan banks have left the dividend payouts unchanged despite reduced profitability thanks to the legal cap on lending rates that has seen interest income slide as demand for loans plummet.
  • Equity defied the trend and posted a 13.9 per cent rise in net profit last year to Sh18.9 billion, up from 4 per cent in 2016, thanks to higher commissions from foreign exchange trading and trade finance. The bank dividend payout was however unchanged at Sh2 a share.
  • Mr Mwangi’s direct holding at Equity is 3.39 per cent, representing 127.9 million shares worth Sh6.7 billion, making him one of Kenya’s wealthiest CEOs.
  • Co-op Bank said its dividend will be unchanged at Sh0.80 a share despite its net profit falling 10.2 per cent to Sh11.4 billion due to the rate cap.

The chief executives of Equity Bank Group #ticker:EQTY and Cooperative Bank of Kenya #ticker:COOP (Co-op Bank) are set to earn tens of millions from dividend payouts in a year that saw lenders struggle to grow earnings due the capping of interest rate.

Equity Bank CEO James Mwangi is set to pocket at least Sh255.6 million while Gideon Muriuki of Cooperative Bank will take home Sh88.2 million.

Most Kenyan banks have left the dividend payouts unchanged despite reduced profitability thanks to the legal cap on lending rates that has seen interest income slide as demand for loans plummet.

Equity defied the trend and posted a 13.9 per cent rise in net profit last year to Sh18.9 billion, up from 4 per cent in 2016, thanks to higher commissions from foreign exchange trading and trade finance. The bank dividend payout was however unchanged at Sh2 a share.

Mr Mwangi’s direct holding at Equity is 3.39 per cent, representing 127.9 million shares worth Sh6.7 billion, making him one of Kenya’s wealthiest CEOs.

Co-op Bank said its dividend will be unchanged at Sh0.80 a share despite its net profit falling 10.2 per cent to Sh11.4 billion due to the rate cap.

READ: James Mwangi calls for total scrapping of interest rates cap

In 2016, Kenya capped commercial lending rates at four percentage points above that of the central bank, and set a minimum deposit rate, constraining profit margins for banks. The central bank rate is currently at 9.5 per cent, putting the maximum cost of loans at 13.5 per cent.

The capping of rates has however had the effect of stifling the credit market as banks have become more cautious in their lending.

Mr Muriuki will earn Sh88.2 million as dividend at Cooperative Bank for his 110.3 million shares currently worth Sh2.14 billion.

Mr Muriuki and Mr Mwangi belong to a small club of billionaire CEOs heading firms listed on the Nairobi bourse.

Mr Muriuki has a 1.88 per cent stake at Cooperative Bank.

Also on the list of super dividend earners is the family of the late Central Bank of Kenya governor Phillip Ndegwa, which will take home Sh159.9 million from their 25 per cent stake at the NIC Bank. The mid-tier lender is set to pay shareholders a lower dividend of Sh1 per share for the 2017 financial year, down from the Sh1.25 paid last year.

Private sector credit grew just 2.1 per cent in the year to February, well below the central bank’s target rate of 12-15 per cent.

ALSO READ: Equity Group’s James Mwangi shortlisted for Africa CEO award