Equity Bank spooks investors with Sh9.4 billion dividend recall

Equity Bank’s #ticker:EQTY share has wobbled from Tuesday after the lender informed investors of a surprise withdrawal of dividend, before recovering some of the losses in the last two days as buyers returned to look for a friendly entry price.

The share closed Tuesday 5.4 percent down at Sh34.20 from Sh36.15 on Monday, when the lender disclosed the move to retain the dividend pay-out totalling Sh9.4 billion due to the need to conserve cash in the wake of the global Covid-19 pandemic.

The stock recouped some of the losses on Wednesday, closing higher by 4.8 per cent at Sh35.85, before retreating marginally by 0.15 per cent Thursday by mid-afternoon.

This is the first time the country’s second-largest bank by assets has skipped dividends since listing on the Nairobi Securities Exchange (NSE) in August 2006.

The pay-out of Sh2.50 a share would yield about seven per cent for investors. The bank was scheduled to pay the dividend on July 24 to shareholders on register as of June 12.

Equity’s move to conserve cash due to the Covid-19 outbreak follows a similar stance by fellow top tier lender NCBA #ticker:NCBA, which last month opted to pay shareholders a bonus share for every 10 held instead of dividends worth Sh2.24 billion.

In his monetary policy press conference Thursday, CBK Governor Patrick Njoroge said while the regulator is not putting out a statement asking lenders to withhold dividends, the move is prudent based on whether a bank feels it may need to get additional capital down the road.

“There is no point in having all this money going out in dividends and the next day you are going back to the shareholders asking for it in form of capital injection,” he said.

Co-operative Bank #ticker:COOP has gone ahead with its dividend pay-out, going as far as bringing forward its Sh1 per share or Sh5.8 billion dividend on April 23.

KCB #ticker:KCB will pay a final dividend of Sh2.50 per share or an aggregate of Sh8 billion before July 3.