Blue-chips cut cash pile by Sh60bn on dividend pay – Business Daily
Nairobi Stock Exchange (NSE) Chief Executive Geoffrey Odundo makes his remarks during a media briefing on the NSE Quarterly Barometer overview report of the stock market on April 26, 2022. PHOTO | FRANCIS NDERITU | NMG
Kenya’s biggest listed firms and tier one banks have in the past year cut their cash holdings by nearly Sh60 billion, unwinding through dividends and new investments some of the muscle they had built up at the height of the Covid-19 pandemic.
Business Daily analysis of the Nairobi Securities Exchange’s (NSE) 16 largest firms –which have a market capitalisation of at least Sh10 billion each—shows that while their cash holdings are still well above the pre-Covid levels, there was a significant drawdown for the 2021 financial year when banks resumed paying dividends.
Capital conservation was the norm in 2020, as uncertainty over the economy during the pandemic forced firms to go slow on new investments and adopt a cautious policy towards distributing earnings to shareholders.
These 16 firms, which comprise the nine tier-one banks, Safaricom, EABL, BAT, KenGen, Jubilee Holdings, Bamburi Cement and Britam, held Sh571.5 billion in cash and cash equivalents at the close of 2021, compared to Sh629.4 billion in 2020.
They had held Sh437.2 billion in 2019, before raising their liquidity by Sh192 billion the year after. Other than cash deposits in bank accounts, companies count investments in Treasury bills, commercial papers, and money market funds as cash equivalents—meaning instruments that can be quickly converted into cash.
For banks, cash equivalents comprise securities or facilities that have less than 91 days to maturity from the date of acquisition, which include T-bills, amounts due from other lenders and balances held at the Central Bank of Kenya, less the mandatory cash reserve ratio deposits.
Banks accounted for the bulk of cash fluctuations in the two-year period, arising naturally from their position as holders of the biggest cash piles in the economy.
The nine tier one lenders together hold nearly seven times the cash pile of the other seven firms the Business Daily analysed. The lenders’ cash pile stood at Sh496.7 billion at the end of 2021, down from Sh571.9 billion in 2020.
A CBK directive was issued in August 2020 requiring them to first seek regulatory approval before issuing dividends, a move that saw a majority freeze payments for the year and helped the cash build up.
Equity Group, which is Kenya’s largest lender by assets, said in its annual report for 2021 that by the end of the year, its cash holdings stood at Sh190.8 billion, down from Sh226.9 billion a year earlier.
It was followed by NCBA at Sh67.4 billion, Stanbic Kenya at Sh62.6 billion, and Standard Chartered Kenya at Sh62.3 billion.
Among the non-bank firms, Safaricom held the largest cash pile at Sh30.7 billion by the closure of its financial year in March 2022, having raised it from Sh26.7 billion a year earlier.
While banks cut their cash piles by issuing larger dividends, non-lenders continued to add on to theirs, signalling improved earnings even as they remained large conservative about raising dividends due to continued concerns about the economy.