18 April 2017

Kenya: NSE-Listed Banks Raise Directors' Pay Despite Fall in Profits

Nairobi Securities Exchange-listed banks increased their directors' pay by 3.6 per cent last year despite the fall in industry earnings, reversing the previous year's effort to keep board spending in check.

The total remuneration of bank directors hit Ksh1.15 billion ($11.5 million) after seven out of the 11 publicly traded lenders -- led by troubled National Bank -- increased their boards' pay.

National Bank nearly doubled its fees to directors to Ksh43.37 million ($0.43 million) last year from the Ksh24.88 million ($0.24 million) it paid out in 2015.

I&M Bank Kenya directors' take-home grew at the second-fastest rate of 61 per cent to Ksh92.99 million ($0.9 million), followed by StanChart's 23 per cent to Ksh162.49 million ($1.62 million), DTB's 17 per cent and Co-op Bank's 8.1 per cent to Ksh115.86 million ($1.15 million) in the review period.

The director's earnings had in 2015 dropped 5.6 per cent to Ksh1.11 billion ($11 million) as most lenders effected strong cost-cutting measures to improve profitability.

Hefty monthly retainers, sitting allowances

Bank directors earn hefty monthly retainers, sitting allowances for every board meeting or board committee meeting attended, travel allowances, and per diem while away on official duty.

The directors' pay has been seen to be out of tune with the industry's performance in a turbulent year in which lending to small and mid-sized enterprises significantly dropped in favour of government securities.

The shift in the lending mix has been mainly attributed to the coming into force of a law capping interest on loans at four per cent above the policy rate -- currently at standing 10 per cent -- last September.

The earnings have put the directors in the league of top bank owners who reaped a 13 per cent rise in total dividend payout to Ksh34.7 billion ($334 million) compared with Ksh30.8 billion ($300 million) in 2015.

The higher paychecks for bank directors also come in the year in which the lenders shed more than 1,000 jobs through massive retrenchment of staff to cut costs.

Both directors' fees and staff costs are treated as operating expenses in the profit and loss accounts, and have a bearing on earnings.

Barclays Kenya attributed last year's 5.9 per cent growth in its directors' pay to an increase in emoluments to board members.

"The basic rates of fees paid to non-executive directors were increased by 10 per cent in Quarter 2 of 2016," Barclays said in its latest annual report, which indicates that the directors earned Ksh107 million ($1 million).

The lender, which is 68.5 per cent controlled by Barclays plc, said the basic rates for fees paid to non-executive directors had remained unchanged since 2014.

The four banks, which cut payments to directors, were Equity (30.8 per cent), KCB (12.3 per cent), Stanbic Kenya (10.4 per cent) and NIC Bank's 8.9 per cent.

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