Why investors will be laughing all the way to the bank

Investors in Nairobi Securities Exchange (NSE) listed lenders are back on good times after the banks reopened the taps to dividends on improved performance in the financial year to December 2021.

Banks had last year either reduced or frozen payment of dividends as they sought to preserve cash amid a biting fallout from the Covid-19 pandemic leading to a significant jump in their provisions for bad loans.

KCB on Wednesday announced the largest dividends among the listed lenders after tripling the payout to its shareholders to Sh9.64 billion at Sh2 per ordinary share in addition to Sh1 per share it paid in January.

The dividend is equivalent to 28 percent of the bank’s record Sh34.09 billion net profits recorded during the period, even as it retained Sh24.5 billion with an eye on new acquisitions and growth of its business in Kenya and Rwanda.

KCB completed the acquisition of Banque Populaire du Rwanda (BPR) in July last year and has since commenced integration of the new unit into the Group.

The lender is projecting a continued economic recovery to further boost shareholder returns this year on higher earnings.  

Recovering economy

“We have increased our dividend three-fold and it is well within our ambition this year. But as you go forward into next year, you do expect that dividends should go to 45 percent of our total earnings, which is what we have done before,” said KCB chief executive Joshua Oigara.

Cooperative Bank retained the Sh5.86 billion dividend payout at Sh1 per share for the third time following a 52 per cent increase in its after-tax earnings for the year.

The lender posted a net profit of Sh16.5 billion in the year to December 2021 supported by an increase in interest income and fees including from its subsidiary Kingdom Bank which contributed a pre-tax profit of Sh512.4 million.

This as it also marginally lowered its provisions for bad loans to Sh7.9 billion down from Sh8.1 billion last year underlining its confidence in businesses and households being in a better position to service their loans due to the recovering economy.

Absa Bank Kenya also resumed dividend payout after its net profit jumped 161 percent to Sh10.9billion shillings driven by higher interest income.

The lender froze dividend payment for the financial year to December 2020 opting to preserve cash amid uncertainty in the financial markets due to the pandemic. The bank will pay its shareholders Sh6 billion in dividends at Sh1.10 per share, the same payout it made for the year 2019.

“We are pleased to resume dividend payment to our shareholders demonstrating the strength and resilience of our business,” said Absa Kenya Managing Director Jeremy Awori.

Standard Chartered Bank Kenya has also announced a record Sh7.1 billion dividend payout to its shareholders at Sh19 per share up from Sh10.5 per share in 2020 after its after-tax profits grew to Sh9 billion up from Sh5.4 billion.