Equity has withdrawn Ksh. 9.5 billion that was proposed as dividend payout to shareholders for the Financial year 2019 citing market uncertainty brought about by the novel Coronavirus pandemic.
In a statement to shareholders, the lender said that the withdrawal of the dividend payout was as a result of the Board’s assessment of risk, post balance sheet date of December 31, 2019 and of the Group’s approach to prudent risk mitigation and management.
This means that investors with the lender listed in NSE, Rwanda Stock exchange and the Uganda stock exchange will have nothing to take home at least for the next one year even as the pandemic continues to spread, affecting key sectors of the economy.
Equity group CEO, James Mwangi said that the prevailing economic situation in the country caused by the pandemic made the lender to take a back seat and preserve its capital.
“The Equity Group Holdings Board took a conservative approach that recognizes the emerging unquantified risk of the pandemic and opted to preserve capital in the face of the prevailing uncertainty,” said Dr. James Mwangi, the Group CEO and Managing Director. Adding that, a strong capital and liquidity position would give the lender the strength and capacity to cushion its business, accommodate and walk with customers during these challenging times.
The COVID-19 global health pandemic has led to a great lockdown which has induced a complex and multi-faceted global crisis of health, economic, and social challenges of an unprecedented magnitude. The pandemic’s effects have created a significant drop in the global GDP, and a substantial loss of employment leading to an economic recession which economists are projecting will evolve into a global depression worse than the Great Depression of the 1930’s. The global economic outlook has worsened considerably since the beginning of the year. The most recent global growth projections from the International Monetary Fund (IMF) have revised the global economic outlook to below the 2.9% achieved in 2019 from an initial projection of 3.3% to -3.0% (negative 3.0%) of GDP growth rate, which they feel is optimistic.
Further, the Board would like to encourage the Bank’s customers to seek opportunities to innovate in the age of the pandemic, and to keep looking for growth possibilities even in this trying time in order to preserve cash and capital, and to not just survive the crisis but to be ready to thrive in the New Normal. By withdrawing the recommendation for a dividend payout the Board is exercising financial prudence so as to conserve cash to enable the Group to respond appropriately to the unfolding crisis in terms of supporting its customers, and to be able to direct cash resources to potential opportunities that may arise as economies in which Equity Group Holdings operates begin to recover.
“If the economic crisis mutates into a financial crisis, Equity Group will be well placed to weather the challenge with a strong capital base, strong liquidity and an agile balance sheet that improves its leverage, and would allow the financial services group to shield and accommodate its customers throughout this period of uncertainty,“ said Dr. Mwangi.
He further added that, the board would explore various options and make suitable recommendations that would enhance shareholder value should the pandemic persist longer than anticipated.