Former Commercial Bank of Africa (CBA) shareholders including the Kenyatta family are set for a 16.2 percent dividend cut following the merger of the lender with NIC Bank to form NCBA Group.
NCBA #ticker:NIC Wednesday recommended a final payout of Sh1.50 per share on top of an interim dividend of Sh0.25, bringing the total payout to Sh1.75.
This is lower than the Sh2.09 that ex-CBA shareholders earned in 2018 ahead of the merger.
The Sh1.75 payout is a boost to former NIC shareholders who in 2018 received Sh1.25, representing a 40 percent rise
NCBA announced a Sh7.84 billion net profit for year to December, and the earnings included CBA performance for the nine months and quarter four results of the merged entity.
In 2018, CBA posted net profit of Sh5 billion while NIC returned Sh4.23 billion
CBA and NIC merged last October through a share swap transaction.
Under the deal, CBA shareholders were offered 53 percent of NCBA.
The dividends due to the Kenyatta family, which has a 13.2 percent stake, will drop to Sh345.97 million from Sh411.7 million earned at CBA in 2018.
The family of the late Phillip Ndegwa, with 11.75 percent stake, will receive Sh307.9 million being a rise from about Sh219.9 million earned while still in NIC.
NCBA Group managing director John Gachora said the bank is yet to pick a new dividend policy to guide future payouts.
“We haven’t yet agreed on a dividend policy that we can announce now. The idea is to have it slightly better than where NIC would have been,” said Mr Gachora.
The profit was supported by a bargain purchase gain of Sh4.1 billion resulting from the merger.
This means the value of the net assets transferred at the completion date was Sh4.1 billion higher than the consideration paid.
The net earnings for the merged entity makes NCBA the fifth most profitable bank in Kenya after KCB #ticker:KCB (Sh25.1 billion), Equity #ticker:EQTY (Sh22.6 billion), Co-operative Bank #ticker:COOP (Sh14.3 billion) and Standard Chartered #ticker:SCBK at Sh8.2 billion.
Net interest income was Sh13.3 billion while operating expenses were Sh20.36 billion.
The merged entity booked Sh2.1 billion as exceptional costs related to the merger.
This was comprised of Sh1.1 billion related to merger costs such as integration, advisory and legal services while the rest relates to amortisation of intangible assets and goodwill write-off on consolidation.
“While the results of 2019 included a number of costs necessary to complete the merger, our underlying performance remained strong” said Mr Gachora.
“Now that we have concluded the merger and established a much stronger bank, I am positive and confident in the business growth prospects going forward.”