Equity, NCBA banks tipped to increase shareholder pay outs


Equity, NCBA banks tipped to increase shareholder pay outs
A display of listed equities at the NSE Photo taken on August 1,2019. PHOTO | CITIZEN DIGITAL

In Summary

  • According to researchers at Genghis Capital, the pair of publicly listed lenders are expected to find leverage for a greater pay-out from strengthened balance sheet positions.
  • Equity is tipped to improve its shareholder pay by 25 per cent to Ksh.2.50 representing a five percent dividend yield while NCBA is set to follow the curve, raising its dividend pay by 20 per cent to Ksh.1.50.
  • Nevertheless, the yield by both banks is expected to remain below the projected banking sector average of 5.3 per cent to significantly lock out any extended positive market sentiment from the tipped corporate actions on shareholder pay.

Equity and NCBA banks are tipped to be the only listed banks to increase their pay out to shareholders as banks commence issuing their full year earnings in March.

According to researchers at Genghis Capital, the pair of lenders are expected to find leverage for a greater pay out from strengthened balance sheet positions.

“We anticipate the two banks to increase their level of dividend in comparison to the 2018 Financial Year supported by adequate capital and liquidity buffers. Further, the management of both banks have alluded to the review of dividend,” noted the researchers in a pre-earnings note issued on Tuesday.

Equity is tipped to improve its shareholder pay by 25 per cent to Ksh.2.50 representing a five per cent dividend yield while NCBA is set to follow the curve, raising its dividend pay by 20 per cent to Ksh.1.50.

On earnings, NCBA is projected to report a 22.5 per cent growth in profit after tax to Ksh.11 billion from improved interest revenue nettings and a steady rise in fees and commissions year on year at 25 per cent.

Equity Bank, on the other hand, is tipped to book a 14.8 per cent growth in profit for the year to Ksh.22.8 billion on strengthened interest and non-interest funded incomes.

Nevertheless, the yield by both banks is expected to remain below the projected banking sector average of 5.3 per cent to significantly lock out any extended positive market sentiment from the tipped corporate actions on shareholder pay.

Nevertheless, the lender’s respective share prices are tipped to hold a 14 and 19.6 per cent potential upside in valuations growth with Equity’s target share price being plotted at Ksh.56.95 while that of NCBA is anchored at Ksh.42.88.

NCBA share price closed Tuesday’s trading session on the Nairobi Securities Exchange (NSE) at a Ksh.36 valuation with Equity’s share price rounding off trading at Ksh.50.

On average, listed banks are tipped to offer a 12.8 per cent growth in earnings per share while shedding off up to 0.34 per cent on non-performing loan (NPLs) levels on the back of stringent risk assessment in lending.

Net interest margins are however expected to grow by a mere 0.1 per cent, a minimal shift to the interest rate cap era as the majority of banks retain interest rates as they were during the holds to interest earnings.

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Story By Kepha Muiruri
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