Top bank CEOs entrench corporate power with big share purchases

NCBA Bank Group Chief Executive John Gachora. [Wilberforce Okwiri, Standard]

Kenya’s top bank executives, among the highest paid in the region, are doubling down on their institutions by aggressively scooping up additional shares, effectively putting their money where their mouth is as they tighten their grip on the country’s tier-one lenders. 

But it’s not just new share purchases. Many of these well-heeled billionaire CEOs have also retained their existing shares, underscoring their confidence in the firms they lead. 

“These bank bosses clearly have skin in the game and are betting big on the continued growth and profitability of their institutions,” said financial analyst Ian Njoroge.

“It’s a bold display of their conviction in the banks’ prospects as they hang onto their current holdings while also acquiring more.” 

The share-buying spree and share retention comes as the Kenyan government slashes spending across the board, raising concerns about the impact on businesses. But the country’s banking titans appear undeterred, tightening their grip on the lenders they helm. 

The move by the well-compensated chief executive officers signals their confidence in the banking sector’s resilience even as the government’s austerity drive weighs on the wider economy, with consulting firms, hotels, airlines, and other industries feeling the pinch. 

The share-buying spree comes as the Kenyan government slashes spending across the board, raising concerns about the impact on businesses. But the country’s banking titans appear unbothered cementing their grip on the lenders they helm. 

The chief executive of Kenya’s Co-operative (Co-op) Bank Gideon Muriuki, for instance, increased his stake in the tier-one lender, tightening his control over the institution, according to regulatory filings. 

Mr Muriuki’s shareholding in Co-op Bank has risen to two per cent from 1.75 previously, filings from the lender show.

He earned a staggering Sh154.39 million in total annual compensation last year, up from Sh140.71 million the previous year. His outsized pay package makes him one of the highest-paid corporate titans in the country. 

Mr Muriuki is the second-largest shareholder in the bank with 117.5 million shares after Co-op Holdings Cooperative Society Ltd, which has a 64.56 per cent stake.

The increase solidifies his position as a major shareholder in the bank he has led as CEO since 2008. Mr Muriuki belongs to an elite of billionaire executives with significant shareholding in the banks they lead.

Others include Equity Group’s James Mwangi with a total direct and indirect shareholding of 3.39 per cent in the lender. 

Co-op Bank is one of Kenya’s largest financial institutions, with a strong presence in the cooperative and agricultural sectors.

Mr Muriuki’s expanded ownership comes as banks navigate a challenging economic environment marked by rising inflation and pressure on lending margins. 

Analysts and shareholders said the move by the CEO demonstrates his long-term commitment to Co-op Bank and confidence in the institution’s growth prospects. However, some industry observers have raised concerns about the concentration of ownership and control at the top of Co-op Bank. 

While Muriuki’s increased stake is within regulatory limits, it does raise questions about succession planning and the bank’s long-term governance, said one shareholder.

Mr Muriuki first became a shareholder in Co-op Bank in 2012, acquiring a one per cent stake. His holding has gradually increased over the years, reflecting his influence over the bank’s strategic direction. 

Under his leadership, Co-op Bank has diversified beyond its traditional cooperative client base, expanding into retail and corporate banking.

The lender has also played a significant role in the Kenyan government’s financial inclusion initiatives. Co-op Bank’s board and major shareholders will closely watch Mr Muriuki’s next moves as the bank seeks to maintain its position in Kenya’s competitive banking sector, the analysts said. 

Equity Group Chief Executive James Mwangi, meanwhile, retained his 3.39 per cent shareholding in the lender, according to regulatory filings.

Mr Mwangi is among the best-paid executives in the country, having taken home an annual compensation of Sh158.8 million.

His shareholding placed him as the fourth largest shareholder of the bank and the single largest individual shareholder. 

Equity Bank employees have the opportunity to own shares in the tier-one lender through an employee share ownership plan (ESOP).

The plan outlined recently will enable Equity, which also operates in Uganda, Tanzania, Rwanda, Burundi, South Sudan, and the Democratic Republic of Congo, to grant its employees options to purchase shares at a significantly discounted price compared to the market value.

Over 10 years, employees will also be able to acquire up to five per cent of the total company shares. 

Despite experiencing a decrease in profitability, the bank opted to keep its dividend unchanged at Sh4 per share for the year ended December, leading to a total payout of Sh15.1 billion, despite the decline in net profit. Mr Mwangi was a big winner, taking home Sh511.8 million through his 3.39 per cent stake in the bank. 

NCBA Chief Executive John Gachora also retained his 0.14 per cent stake at the tier-one lender, representing 2.3 million shares, according to regulatory filings. Mr Gachora took home a total of Sh185.76 million last year in annual pay. 

His gross pay shot up by Sh38 million from the Sh147.7 million he received the previous year.