Bank shareholders surprise payday as lenders declare late dividends

Bank shareholders are expected to smile all the way to the bank as lenders declare unprecedented interim dividend payments.

While banks have traditionally issued interim dividends in the middle of the year, Standard Chartered Bank Kenya and KCB Group have defied the tradition by issuing dividends of Ksh.5 and Ksh.1 respectively in November.

Stan Chart’s total interim dividend payout rounds off to Ksh.1.97 billion while KCB’s tallies to Ksh.3.2 billion.

The pair had defied the odds of the pandemic to cumulatively pay dividends of Ksh.4.1 billion and Ksh.3.2 billion respectively at the end of last year.

According to the Head of Research at AIB-AXYS Africa Sarah Wanga, the unexpected dividend payouts through nine months of the year is good news for investors and a pointer to a view of strengthened full year earnings by banks.

“Banks have thought that it makes sense to declare some dividends as their numbers look good throughout the year,” she said.

“This is positive for investors as it is not a payment we expect to see every now and then unlike the final dividend which is usually expected.”

So far in the year, tier 1 banks have easily doubled their earnings as profitability for the sector normalizes after the disruptions brought by the COVID-19 pandemic.

According to Wanga, banks now have a better view of their full year earnings, two months to the close of their fiscal period on December 31 with better earnings being technically a certainty.

“We expect a number of banks to revert to their pre-COVID-19 dividend policy," Wanga added.

Further, Wanga anticipates additional late dividend declarations in the next week as banks round off their reporting of quarter three earnings (January-September) by November 30.

Of the top banks, only Stanbic Holdings Plc and NCBA Group declared interim dividends in June this year.

Banks are expected to disclose their 2021 full earnings in February and March next year.

Besides a trim in loan default covers, banks have rebounded their earnings by growing their operating income streams which covers interest earnings from lending and non-interest funded income (NFI).