Banks are the latest financial institutions to cite market uncertainty as reasons to fail dividend payouts, primarily COVID-19.
While the High Court allowed listed firms on the Nairobi Securities Exchange to hold online Annual General Meetings, banks have opted not to explore this option. For instance, WPP Scangroup will hold a unique extraordinary general meeting to obtain shareholder approval to complete the sale of one of its subsidiaries.
Equity Group Holdings Plc, the largest bank on the Nairobi Securities Exchange by market capitalization, withdrew its recommendation of a sh9.5 billion dividend payout to its shareholders.
On its part, Standard Chattered Bank also withdrew from holding an AGM. The Bank, Kenya’s sixth largest by assets, had proposed dividend of Sh15 for every ordinary share.
“We are monitoring the COVID-19 pandemic which continues to pose a challenge even as we work towards determining the most suitable time and manner for holding the 34th AGM which remains postponed,” the board’s company secretary Nancy Oginde said in a statement.
She added that the company will not be in a position to pay the dividend on 28 May 2020 as proposed and announced through the NSE as it would not have been approved by shareholders as an AGM as required.
The COVID-19 global health pandemic has led to a great lockdown which has induced a complex and multi-faceted global crisis of health, economic, and social challenges of an unprecedented magnitude. The most recent global growth projections from the International Monetary Fund (IMF) have revised the global economic outlook to below the 2.9 per cent achieved in 2019 from an initial projection of 3.3 per cent to -3.0 per cent (negative 3.0 per cent) of GDP growth rate, which they feel is optimistic.
“The Equity Group Holdings Board took a conservative approach that recognizes the emerging unquantified risk of the pandemic and opted to preserve capital in the face of the prevailing uncertainty,” said Dr. James Mwangi, the Group CEO and Managing Director.
He added that, a strong capital and liquidity position gives them the strength and capacity to cushion their business and accommodate and walk with customers during these challenging times.
“If the economic crisis mutates into a financial crisis, Equity Group will be well placed to weather the challenge with a strong capital base, strong liquidity and an agile balance sheet that improves its leverage, and would allow the financial services group to shield and accommodate its customers throughout this period of uncertainty,“ said Dr. Mwangi.
He asserted that should the crisis not play out as anticipated, the Board will explore various options and make suitable recommendations that will enhance shareholder value.
NCBA was the first bank in East Africa to pull its final dividend for last year of sh1.50 per share and instead offered investors a bonus share issue of one for every 10 held.
The move is not new or limited to Kenya alone. In Britain, the Bank of England has also ordered lenders to cancel plans for cash bonuses for executives, as it asked financial institutions to boost their strength ahead of a likely recession.
Britain’s largest banks have agreed to scrap nearly £8 billion worth of dividends.