Equity Bank explains why it won't pay shareholders dividends
Equity Bank has dismissed reports that they are having trouble keeping up float due to the effects of the COVID-19 pandemic.
On Monday, there were reports on social media that the bank’s pockets were hollow, following a decision by the headquarters in Kenya to revoke payments of dividends to shareholders.
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“The Board of Directors of Equity Group Holdings Plc, the largest bank on the Nairobi Securities Exchange by market capitalization, has withdrawn its recommendation of a Kshs 9.5 billion dividend payout to its shareholders,” a statement from the bank read in part.
“The withdrawal of the dividend payout speaks to the Board’s assessment of risk, post balance sheet date of December 31, 2019 and of the Group’s approach to prudent risk mitigation and management,” the statement continued.
Nile Post contacted an official at Equity Bank Uganda who maintained that the decision by the bank is not on the basis of treasury depletion but a standard measure to preserve capital in the face of ‘prevailing uncertainty”.
“The stories are the usual misinterpretation. We have just decided to preserve cash and build a war chest to build resilience and be ready for the economic phase of this pandemic,” the official said.
“Besides, even if you look at what the central banks recommended, no bonuses or dividend payouts. Check the papers yesterday for BoU's instructions to commercial banks. A strong bank focuses on maintaining liquidity. Any bank which pays out a dividend now would potentially be diminishing its ability to be agile if opportunities arise,” the official added.
The bank, in a statement, said that the proposal to withdraw the dividend payment was aimed at exercising financial prudence to conserve cash so that they are able to appropriately respond to unfolding crisis in terms of supporting customers.
“If the economic crisis mutates into a financial crisis, Equity Group will be well placed to weather the challenge with a strong capital base, strong liquidity and an agile balance sheet that improves its leverage, and would allow the financial services group to shield and accommodate its customers throughout this period of uncertainty, “said Dr. James Mwangi, Equity Bank CEO.
“However, should the crisis not play out as anticipated, the Board will explore various options and make suitable recommendations that will enhance shareholder value.”
