StanChart maintains high dividend payout at Ksh 31, Despite 38% Profit Drop

Standard Chartered Bank Kenya will maintain a high shareholder payout despite a sharp drop in earnings, signalling confidence in its capital strength even as income pressures mount.

The lender reported a 38 per cent decline in net profit to KSh 12.4 billion for the year ended December 2025, down from KSh 20.1 billion a year earlier, weighed by falling interest income, weaker trading revenues and a one-off pension-related charge.

Despite these shortcomings, the bank proposed a total dividend of KSh 31 per share, translating to a payout ratio of about 95 per cent, among the highest in the market.

Managing Director Kariuki Ngari said the payout reflects the bank’s commitment to delivering consistent returns to shareholders even in a challenging operating environment.

Income pressure from lower rates, forex slowdown

Total operating income fell 16.5 per cent to KSh 42.3 billion, as the interest rate environment softened and foreign exchange gains, key to the bank’s strong 2024 performance, declined sharply.

Net interest income dropped 13.2 per cent to KSh 28.9 billion, with interest earned on loans falling 25.9 per cent amid lower lending rates.

Non-interest income declined 23 per cent to KSh 13.4 billion, dragged by a 58.6 per cent collapse in foreign exchange trading income as the shilling stabilised, removing a key revenue tailwind.

The bank said it partially offset margin pressure by cutting expensive deposits and increasing income from government securities.

Pension dispute adds to cost burden

Operating expenses rose 13.3 per cent to KSh 25.5 billion, largely due to a KSh 2.6 billion one-off pension charge linked to a long-running dispute with former employees.

The case, dating back more than a decade, was upheld through multiple court levels, culminating in a Supreme Court decision in 2025.

The total liability is estimated at KSh 7 billion, with the bulk expected to be absorbed over time.

Asset quality improves despite earnings hit

In contrast to weaker profitability, the bank reported improved credit quality.

The non-performing loan (NPL) ratio fell to 5.4 per cent, down from previous levels, while loan loss provisions declined 16.3 per cent to KSh 1.99 billion.

Gross NPLs dropped significantly, reflecting recoveries and tighter risk management.

Balance sheet tightens as deposits fall

Total assets declined 5.5 per cent to KSh 363.5 billion, while customer deposits fell 4.1 per cent to KSh 283.4 billion.

Loan growth remained modest, with net loans rising 1.8 per cent, supported by corporate lending and wealth solutions.

Cash holdings dropped sharply during the year, partly reflecting the bank’s historically high dividend payout in 2024.

Strong capital supports payout decision

The bank maintained robust capital and liquidity positions, with core capital adequacy at 20.36 per cent—well above regulatory minimums.

Liquidity levels also remained strong, giving the lender room to sustain high dividend distributions despite declining profits.

The KSh 31 per share payout, though lower than last year’s KSh 45, remains the second-highest in the bank’s history, extending a dividend track record spanning decades.

Leadership transition underway

The results come as outgoing CEO Kariuki Ngari prepares to hand over leadership to Birju Sanghrajka, marking a transition period for the bank.

While earnings pressures persist, the bank’s decision to sustain a high payout suggests management expects stability in its core operations, even as revenue normalises after last year’s exceptional gains.

Read Also: KCB Posts Record KSh 68.35Bn Profit, Dividends Scale to KSh 7 Per Share – Business News