NSE trading floor. FILE PHOTO | NMG A record number of profit warnings by commercial banks has left their shareholders at risk of missing dividends worth over Sh33 billion after the lenders were forced to cut or suspend the payments to conserve cash in the wake of the Covid-19 crisis.
An unprecedented six of the 11 Nairobi Securities Exchange (NSE)-listed banks have warned that their profits will fall by more than a quarter—painting a bleak dividends outlook.
“It is unlikely that you issue a profit warning and then pay a dividend because what you are trying to do is to ensure that you retain cash in the business to keep going in the challenging circumstances,” ICEA-Lion Asset Management chief executive Einstein Kihanda said.
The freeze on dividend payouts will see investors miss about Sh33 billion, going by the 2019 payouts or Sh40.47 billion that was paid in the previous year.
Most of the lenders, including Standard Chartered Bank Kenya, Absa Kenya, Cooperative Bank of Kenya, DTB, I&M Holdings and NCBA, have all issued profit warnings.
KCB, Equity, Cooperative Bank, Absa, Stanbic, DTB, Standard Chartered Bank of Kenya, NCBA and I&M saw a combined 29.2 percent or 23.36 billion decline in profitability in the nine months to September.
In terms of falls in net profit, Absa took the heaviest hit (65.4 percent), followed by NCBA (45.3 percent), KCB (43.2 percent), Stanchart (30.41 percent) and Stanbic (30.1 percent).
Several chief executives now say they will give priority to cash-preservation as they seek strong capital buffers in line with a Central Bank of Kenya (CBK) circular issued last August.
KCB Group already skipped the Sh1 per share interim dividend or an equivalent of Sh3.21 billion, amid a 43.1 percent fall in nine month earnings, and says it will require CBK clearance in case it settles on any final payout.
“Our priority is to preserve our cash resources as we look at the options for supporting customers during the crisis,” said KCB Group CEO Joshua Oigara in an interview after releasing the nine-month results.
“We have no concern at our cash level but we are looking at CBK guidance and we will consult them before end of March.”A dividend freeze by KCB will deny investors Sh11.24 billion, going by the previous payout by the country’s most profitable bank.Equity Group, which last year declared Sh9.4billion dividend but later suspended it on cash preservation claims, maintained that any such payouts for this year would depend […]