Absa Bank #ticker:ABSA has become the first top bank to withhold dividends after the lender’s net profit plunged 43.8 per cent on costs linked to rising loan defaults.
The bank on Tuesday said it will not pay dividends this year due to economic uncertainty in the wake of the Covid-19 pandemic.
Absa posted Sh4.2 billion in net profit for the year ending December 2020, from Sh7.47 billion a year earlier on account of high loan provisions and a restructuring plan that saw it lay off an undisclosed number of employees.
Central Bank of Kenya (CBK) is demanding a high level of capital buffers ahead of clearing lenders to pay out billions of shillings to shareholders.
This has seen a number of banks revise downwards dividends that had received board approval in the push to ensure the payouts are a fraction of last year’s disbursements.
“The directors did not recommend a dividend payout because Covid-19 is still here with us and we are expecting a big third wave. Until vaccinations have been done, we are still sceptical to say we are already on the recovery,” Absa Bank chief finance officer Yusuf Omari said.
“We are positioning ourselves for business growth. We had Sh103 billion lending in a year of pandemic… We will be looking at it in 2021.”
Last year, the Nairobi Securities Exchange-listed lender paid total dividends of Sh1.10 per share.
The bank reported a 115 per cent rise in loan provisions to Sh9 billion, having restructured loans worth over Sh62 billion.
Loan defaults between March –when the first coronavirus case was reported in Kenya — and December stood at Sh71.26 billion and the strain on banks’ balance sheets is expected to persist for months ahead.
KCB #ticker:KCB declared a dividend of Sh1 per share or an aggregate of Sh3.2 billion, representing a 71.4 per cent drop from a payout of Sh3.5 per share.