Equity saves 431 million shillings thanks to change in dividend policy

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Equity saves 431 million shillings thanks to change in dividend policy


Equity Bank Branch on Muindi Mbingu Street in Nairobi on Thursday April 1, 2021. PHOTO | DENNIS ONSONGO | NMG

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Summary

  • The lender said earlier that it had developed a dividend policy of paying out a minimum of 30% and a maximum of 50% of net income.
  • The policy came after the bank suspended dividends for 2019 and 2020 amid economic uncertainty brought by the Covid-19 pandemic.
  • The bank declared a net profit of 39.1 billion shillings after minority interests, which means that the declared dividend amounts to 28.8% of profits.

Equity Group #ticker: EQTY will save 431.3 million shillings after changing its dividend policy.

The bank declared a final dividend of 3 shillings per share, making a total of 11.3 billion shillings for the year ending December.

This amount is less than the minimum of 11.75 billion shillings that it would have paid based on its new dividend policy.

The lender said earlier that it had developed a dividend policy of paying out a minimum of 30% and a maximum of 50% of net income.

The policy came after the bank suspended dividends for 2019 and 2020 amid economic uncertainty brought by the Covid-19 pandemic.

“The group is confident to return to paying dividends in 2021, with its policy of distributing 30% to 50% of profit after tax and due to the investment made in this growth, this percentage should be a higher amount than ‘he hasn’t been in the past,’” Equity said when crafting the policy.

The bank declared a net profit of 39.1 billion shillings after minority interests, which means that the declared dividend amounts to 28.8% of profits.

Although outside the political range, Equity’s dividend is the largest ever for the company and the banking industry in absolute terms.

It is ahead of KCB’s 9.6 billion shillings, StanChart’s 7.1 billion shillings, Co-op Bank’s 5.86 billion shillings, Absa’s 5.9 billion shillings and 3.55 billion shillings from Stanbic Holdings.

As a share of net profit, however, Stanchart’s #ticker:SCBK dividend is the most generous at nearly 80%, followed by Absa #ticker:ABSA (55%), Stanbic #ticker:SBIC (49%), Co-op Bank #ticker:COOP (35%) and KCB #ticker:KCB at 28%.

Equity’s improved profitability during the reporting period was driven by higher interest income, non-interest income as well as lower operating expenses on reduced provisioning for irrecoverable debts.

The lender cut its provision for loan losses to 5.8 billion shillings from 26.6 billion shillings in 2020, attributing the decision to improved loan recovery which saw the stock of bad debts fall to 53, 8 billion shillings against 59.3 billion shillings.

Equity expects higher returns from its client loan portfolio this year after the Central Bank of Kenya (CBK) approved its risk-based lending model that will allow it to raise rates up to 18.5 % compared to current averages of around 13.5%.

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