The NCBA Group has raised its interim dividend by 28.6 percent to Sh2.25 per share, equivalent to Sh3.71 billion, following a jump in net profit for the six months to June 2024.
Financial results released on Thursday showed that the lender increased the interim dividend from Sh1.75 per share paid last year. The increase came as net profit rose five percent to Sh9.82 billion from Sh9.35 billion.
The dividend will be paid on or around September 25 to shareholders on the company's register by the end of September 11.
Net interest income fell to Sh16.45 billion from Sh17.2 billion due to higher interest expenses on deposits, but non-interest income rose 7.9 percent to Sh14.91 billion, leading to the growth in net profit.
Operating expenses rose by three percent to Sh19.2 billion, largely offset by a 38 percent reduction in loan loss provisions to Sh2.71 billion. This came at a time when the non-performing loan ratio improved from 13.2 percent to 12 percent, below the industry average of 16.1 percent.
“Despite some headwinds presented by the current operating environment, our diversified business model continued to demonstrate resilience,” said John Gachora, NCBA's chief executive.
“Whenever we find that we have made good profits and we haven’t yet found the right opportunity to invest those profits, our commitment is to continue paying healthy dividends in this market.”
The interim dividend signals another year of dividend increases from the lender, which last year increased the total payout per share to Sh4.75 from the Sh4.25 it paid on 2022 performance.
NCBA ended June this year with a gross non-performing loan book of Sh40.9 billion, down from Sh42.6 billion in June last year. The lender said measures such as setting up a non-performing loans unit and improving its internal credit quality checks had helped reduce loan defaults.
The bank's interest expenses on customer deposits reached Sh20.3 billion, up 67.2 percent from Sh12.1 billion paid on deposits in a similar period last year.
The rise in interest expenses was faster than the 2.3 percent increase in deposits to Sh528.9 billion, showing that the lender was paying a higher interest rate to hold customer deposits in a regime of rising returns on other investment classes such as government paper.
“The bulk of our deposits and lending is corporates and this is very competitive and finely priced. On the deposit side, they are looking for the best rate and on the borrowing side, they are looking for the best rate as well,” said David Abwoga, NCBA's director of finance.
“We have had to absorb some of the high cost of funding and that absorption is what you see in the decline in our net interest income.”
