Absa parent firm forgoes Sh1.2 billion in dividends

Absa Kenya #ticker:ABSA has kept Sh1.2 billion worth of dividends that it was to remit to its parent company this week, with the move aimed at boosting the lender’s capital position.

South Africa-based Absa Group waived its right to part of its dividend ahead of the Nairobi Securities Exchange-listed firm’s annual general meeting on Friday last week.

The multinational had received an interim dividend of Sh744.1 million or Sh0.2 per share on October 11, 2019, and was entitled to a final payout of Sh3.3 billion (Sh0.9 per share) this week. It will, however, now receive a smaller final dividend of Sh2.1 billion equivalent to Sh0.57 per share.

This means that its total dividend dropped 29.3 percent to Sh2.8 billion (Sh0.77 per share) compared to the earlier anticipated Sh4 billion (Sh1.1 a share).

Absa Group is the only investor waiving part of its dividend, with minority shareholders in the Kenyan unit receiving their payout in full.

The multinational says it will not receive additional shares in Absa Kenya as a result of the dividend loss. It holds a 68.5 percent equity in the subsidiary.

“The effect of the waiver is to further strengthen the capital position of Absa Kenya,” the NSE-listed firm said in a statement.

“The waiver of a portion of the dividend is irrevocable, unconditional and does not in any manner whatsoever alter the shareholding of Absa Group or that of minority shareholders.”

The partial dividend waiver is part of the multinational’s efforts to help the Kenyan business to shoulder costs running into billions of shillings incurred in separating from its former majority shareholder, London-based Barclays Plc.

The parent firm last year provided the lender with a Sh2.6 billion loan, which went to boost its tier-two capital.

“Our holding company Absa Group Limited will provide capital support to help mitigate the capital and cash flow impact of the separation costs over time,” Absa Kenya says in its latest annual report.

The Kenyan subsidiary reported a three percent net profit growth in the first quarter ended March, weighed down by the separation costs.