Listed banks retain Sh105bn earnings

Despite declaring all-time high dividend distributions to shareholders, the nine Kenyan banks listed on the Nairobi Securities Exchange (NSE) retained a record Sh105.3 billion of their profits in the fiscal year ended December.

This equates to a profit retention rate of 62.5 percent, which will fuel future earnings through reinvestments such as expansion and acquisitions, which the large players have become fond of.

The combination of record pay-outs and profit retention demonstrates the banking sector’s earnings boom, which was aided by an increase in non-funded income and interest income, as well as increased lending and foreign exchange trades.

An examination of the banks’ profitability and dividend actions, excluding Bank of Kigali and HF Group, reveals that the lenders will pay out a total of Sh63.1 billion for the review period, including interim distributions paid earlier.

Among the listed lenders that kept the majority of their profits were KCB, DTB, I&M, and Equity.

KCB declared 18.5 percent of its net earnings, or Sh6.4 billion (Sh2 per share), as a dividend to shareholders and retained 81.5 percent, or Sh34.4 billion.

It had the lowest distribution ratio and was also the only bank to reduce its dividend while the others increased their pay-outs. The dividend has been reduced from Sh3 per share, or Sh9.6 billion, in the previous year.

During the review period, the bank’s net profit increased by 19.5 percent to Sh40.8 billion.

DTB increased its net income by 55% to Sh6 billion and declared a distribution of 23% or Sh1.39 billion (Sh5 per share) as enhanced dividends in the fiscal year under review, while retaining Sh4.6 billion or 76.9%. The dividend increased from Sh838.8 million (Sh3 per share) the previous year.

I&M increased its net profit by 37.7 percent to Sh11.2 billion and increased its dividend to Sh3.7 billion (Sh2.25 per share), keeping Sh7.5 billion.

Despite the dividend increasing from Sh1.5 per share (Sh2.4 billion) in 2021, this amounts to a distribution of one-third of net income.

In the review period, Equity, the most profitable lender, increased its net income by 14.6 percent to Sh44.8 billion and declared a higher dividend of Sh4 per share (Sh15.1 billion).

The new dividend is 33.6 percent of net profit, up from 28.8 percent or Sh3 per share (Sh11.3 billion) declared the previous year.

Equity kept Sh29.8 billion, or 66.4 percent of the net profit made during the review period.

Standard Chartered Bank Kenya was the most generous, distributing 68.9 percent of its net income of Sh12 billion. This equates to a Sh22 per share pay-out (Sh8.3 billion), with the lender transferring Sh3.7 billion to retained earnings.

Following StanChart, NCBA Group, Absa Bank Kenya, and Stanbic distributed more than half of their net income while also strengthening their balance sheets with the retained profits.