CBK to rule on dividend issuance by lenders

CBK governor and Monetary Policy Committee (MPC) chairman Patrick Njoroge at the CBK offices on January 28, 2020. [David gichuru, Standard]  

The Central Bank of Kenya (CBK) will have to approve any plans by commercial lenders to issue dividends for this year, it said in a memo to bank executives yesterday, an unusual move caused by Covid-19 crisis.

Lenders have seen their earnings plunge in the first half of this year, hit by higher provisions for bad loans, on the back of the Covid-19 pandemic.

They have also had to restructure more than a quarter of total customer loans, to provide relief to individuals and firms hit by the disruptions.

All lenders are required to resubmit their internal capital adequacy assessments by the end of October, the  banking sector regulator said in the memo, reflecting the impact of the pandemic.

They will also be expected to discuss their plans with the regulator, before making decisions on distribution of profits to their shareholders, the memo said.

“The duration and extent of the pandemic remains uncertain and it is critical that these institutions remain resilient by strengthening their balance sheets,” CBK said.

Banks are estimated to have registered a drop in profitability by 30 per cent in what is turning out to be one of the worst half years for the country’s lenders.

An analysis of financial results for 28 banks by The Standard, shows the industry’s net profit declined to Sh44 billion in the first half of 2020 from Sh62.9 billion in the same period last year, reflecting the negative effects of Covid-19.