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Thursday, September 3, 2020
CBK to rule on dividend issuance by lenders
By Reuters
The Central Bank of Kenya (CBK) will have to approve any plans by
commercial lenders to issue dividends for this year, it said in a memo
to bank executives yesterday, an unusual move caused by Covid-19 crisis.
Lenders have seen their earnings plunge in the first half of this year,
hit by higher provisions for bad loans, on the back of the Covid-19
pandemic.
They have also had to restructure more than a quarter of total customer loans, to provide relief to individuals and firms hit by the disruptions.
All lenders are required to resubmit their internal capital adequacy assessments by the end of October, the banking sector regulator said in the memo, reflecting the impact of the pandemic.
They will also be expected to discuss their plans with the regulator,
before making decisions on distribution of profits to their
shareholders, the memo said.
“The duration and extent of the pandemic remains uncertain and it is
critical that these institutions remain resilient by strengthening their
balance sheets,” CBK said.
Banks are estimated to have registered a drop in profitability by 30 per
cent in what is turning out to be one of the worst half years for the
country’s lenders.
An analysis of financial results for 28 banks by The Standard, shows the
industry’s net profit declined to Sh44 billion in the first half of
2020 from Sh62.9 billion in the same period last year, reflecting the
negative effects of Covid-19.
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