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Equity Bank CEO James Mwangi forgoes Sh471m in dividends

Pensioners, billionaires and institutional investors are among the shareholders of Equity Group who will forgo hefty dividends after the lender cancelled its proposed payout of Sh2.5 per share or a total of Sh9.4 billion.

They include Britam Holdings, Equity’s CEO James Mwangi, the lender’s founder and former chairman Peter Munga, National Social Security Fund (NSSF) and JPMorgan Asset Management (UK) Limited.

The investors were in line to receive gross dividends of between Sh38.5 million and Sh689.2 million each on July 24 but the bank retracted the payout last week, citing the need to conserve cash in the wake of the Covid-19 pandemic.

The estimates are based on the latest available disclosures of the investors’ holding of Equity shares and excludes the impact of taxes on various classes of shareholders.

Britam is among the biggest losers, having anticipated a Sh689.2 million payout. The insurer disclosed that it held 275.7 million shares of the bank as of December 2019.

Gross dividends

The insurer last year received gross dividends of Sh594.7 million on the 297.3 million units of the lender’s stock it held as of December 2018.

This was after the bank made a payout of Sh2 per share or an aggregate of Sh7.5 billion.

Cancellation of the dividend this year will reduce Britam’s cash flows and earnings, with the insurer also taking a hit from paper losses from the stock market rout.

Mr Mwangi is second after forfeiting the Sh471.7 million he was to receive, with the income loss coming after the billionaire pledged to give Sh300 million to aid in the fight against the Covid-19 pandemic.

He received a dividend of Sh377.3 million last year from his 188.6 million shares or five per cent stake in the lender.

The NSSF will miss a Sh300.2 million payout, lowering its returns to retirees. The State-controlled fund last year earned Sh240.2 million, based on its latest available disclosure that it holds 120.1 million shares of the bank.

JPMorgan is among Equity’s top foreign institutional investors that will go without dividends this year.

The asset manager, which held 48.5 million shares as of April 31, 2020, was on course to receive Sh121.2 million.

Equity was to close its books for the dividend on June 12.

Sold down their stakes

Mr Munga, whose holding was last disclosed at 15.4 million shares, would have earned a dividend of Sh38.5 million.

This would have been a 25 percent increase from Sh30.8 million he received last year. Mr Munga is among the lender’s original shareholders who have sold down their stakes to take profits and diversify wealth.

Investment banker Jimnah Mbaru said Equity should issue a dividend in the form of shares.

“Equity Bank should have issued a scrip dividend in order to preserve cash instead of skipping the cash dividend previously announced. Shareholders would get the same dividend by selling the scrip shares on the stock exchange,” he tweeted.

This story first appeared in the Business Daily.