Dividend dryspell at Equity to end this year

Shareholders of Equity bank should expect a dividend payout at the end of this financial year, the bank's CEO James Mwangi has said.

Speaking when the lender released its financial results for the first six months of 2021, Mwangi said that the lender will go back to paying out dividends starting this year in compliance with a policy of its board.

The payout will end a two-dividend dry spell that has seen the bank reinvest its shareholder earnings.

The shareholders will receive 30 percent to 50 percent of annual net profits as dividends for the financial year ending December 31, 2021.

The new policy is a departure from the current one that had not been fixed and mostly allows the group to distribute up to 40 percent.

The open policy had allowed Equity to freeze payments as has happened in the last two financial years, as the lender to preserve cash.

Having the new policy will mean that the bank’s shareholders will not miss out on dividends on any given year it posts a profit.

Equity’s last dividend payout was on the 2018 performance, with shareholders taking home Sh7.54 billion.

In 2020,the largest bank by assets, raised the payout to Sh9.43 billion but recalled it citing the need to preserve cash in the Covid-19 business environment.

The skipped payment for two years had seen retained earnings jump by Sh50 billion or 64 percent to Sh127.4 billion.

Meanwhile, the lender yesterday announced a 98 percent growth in half-year profits to Sh.17.9 billion up from Sh9.1 billion the previous year defying the ravaging economic effects of the pandemic.

Mwangi said the defensive and offensive strategy adopted by the Group at the onset of the Covid-19 pandemic to create resilience, agility and recovery was very effective in driving performance.

The offensive growth strategy saw deposits register a 51 per cent growth to Sh820.3 billion up from Sh543.9 billion, while long term borrowed funds grew by 78 per cent to Sh102.3 billion up from Sh57.6 billion.

Net loans and advances grew by 29 per cent to Sh504.8 billion up from Sh391.6 billion, while investment in Government securities grew by 46 per cent to Sh315.5 billion up from Sh216.4 billion resulting in 50 per cent growth in total assets to Sh1.12 trillion up from Sh746.5 billion.

The aggressive growth strategy effected by the Group resulted into a 33 per cent growth in topline total income to Sh51.6 billion up from Sh38.7 billon driven by a 26 per cent growth in net interest income of Sh31.2 billion up from Kshs.24.6 billion

The defensive approach focused on high asset quality, strong capital and liquidity buffers that saw the Group present a strong non-performing loans (NPL) coverage of 92 per cent up from 73 per cent the previous year attributed to a decline in gross non-performing loans by Sh1.3 billion from Sh61.2 billion to Sh59.9 billion.

Loan loss provision declined by 66 per cent from Sh7.7 billion to Sh2.6 billion to register cost of risk of 1.2 per cent down from 4.2 per cent.

Net non- performing loans declined by Sh5.4 billion from Sh28.3 billion to Sh22.9 billion due to the aggressive provisioning the previous year under the defensive strategy.

Business transformation through innovation and digitization has continued to yield an agile and efficient business for the lender with 97 per cent of their customer transactions being online.

This saw digital banking transactions grow by 57.6 per cent to 606.9 billion up from 385.2 billion transactions same period the previous year.

The value of the digital transactions increased 111.3 per cent to Sh2.5 trillion up from Sh1.16 trillion for a corresponding period the previous year.

The Group is optimistic about the future outlook of business given its continued delivery of convenience from the transformation strategy of the economic engine hand in hand with an enhanced trust capital brought on by shared prosperity programs of the Equity Group Foundation