Standard Chartered cash dividend of 27.11 %: Will it survive NRB scrutiny?

The big banks are turning deaf ear to the Nepal Rastra Bank (NRB) efforts to curtail cash dividend from the profit of last fiscal year. Standard Chartered Bank Limited (SCB) has joined NABIL and Everest Bank by announcing cash dividend when the central bank is pushing to limit the cash dividend for tax purpose only.

Everest and Nabil bank have declared 30% bonus dividend each, 6.58% and 6.842 % Cash dividend respectively.

In the midst of this, SCB has announced to distribute 15 percent bonus share and 27.11 percent cash dividend including for tax purpose to its shareholders.

The announcement from SCB has failed to meet the general investors’ expectation. It has lowered the benchmark for stock dividend set by the big banks like NABIL and Everest. The investors’ disappointment was clearly seen in the secondary market. The shares of SCB fell by Rs 183 /unit (-7.18%) to close at Rs 2365/ unit on December 08, 2015.

Diwakar Poudel, Head of Brand & Marketing and Corporate Affairs of SCB, said, “The dividends approved by our BoD have been sent to NRB for the approval. We have declared the dividend as per our business and is well within guideline set forth by the central bank”

Trilochan Pangeni, spokesperson for the NRB, said, “The NRB will approve dividends of the bank if it is in accordance with the capital plan submitted by the bank. Furthermore, the NRB should be satisfied that the bank in question will comfortably reach the required paid up capital within the stipulated time frame by giving the proposed dividend.”

Recent corrective action from the NRB

The NRB directed Nepal Investment Bank Limited (NIBL) to convert its proposed 15 % cash dividend to bonus.  According to the officials at NIBL, the NIBL had proposed 18 % bonus share and 15 % cash dividend on its proposal to the NRB. The NRB directed NIBL to converts its 15% cash dividend to bonus share. Thus, the current bonus share stands at 33 % instead of 18 % bonus and 15% cash dividend.

Likewise, the NRB has forced Triveni Bikas Bank limited to amend  the dividend to 10.08% stock dividend(Bonus Shares), which was announced previously as 10% Stock Dividend and 0.53% cash dividend(for tax purpose).