Six top bank CEOs earn Sh1 billion in one year

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By CHARLES MWANIKI, Source: Business Daily

SUMMARY

  • Kenya’s six highest-earning bank chief executive officers took home a total of Sh1 billion in salaries, allowances and bonuses last year, reaping from increased profitability of the lenders even as other sectors of the economy went through lean times.
  • Pay disclosures made in the banks’ annual reports show that the CEOs of Co-operative Bank, KCB, Barclays Kenya, Standard Chartered, NIC Bank and mortgage financier HF together earned Sh1.01 billion in 2018, up from Sh987 million a year earlier.
  • The top-six earners took home nearly twice their basic salaries in bonuses and allowances on average.
  • Banks’ incentive-based pay packages are designed to reward performance as measured by the lenders’ bottom line growth.

Kenya’s six highest-earning bank chief executive officers took home a total of Sh1 billion in salaries, allowances and bonuses last year, reaping from increased profitability of the lenders even as other sectors of the economy went through lean times.

Pay disclosures made in the banks’ annual reports show that the CEOs of Co-operative Bank  , KCB , Barclays Kenya , Standard Chartered , NIC Bank  and mortgage financier HF  together earned Sh1.01 billion in 2018, up from Sh987 million a year earlier.

 

The top-six earners took home nearly twice their basic salaries in bonuses and allowances on average. Banks’ incentive-based pay packages are designed to reward performance as measured by the lenders’ bottom line growth.

Double-digit growth in the lenders’ profitability has in recent years generated heated debate when viewed against record profit warnings and job cuts announced by non-financial institutions.

Co-operative and KCB, whose chief executives – Gideon Muriuki and Joshua Oigara – earned Sh376 million and Sh273 million respectively last year, attributed the bulk of their pay to performance-based bonuses.

Mr Muriuki’s basic salary for the year stood at Sh105.5 million, while Mr Oigara’s was Sh68 million. “The main driver for the increase in the executive directors’ pay was bonus payment, which is performance-based and an enhancement in the bonus policy for employees,” said KCB in an earlier response to queries on the CEO’s pay.

 

“Bonus and salary adjustments for staff are tied to achievement of multiple metrics, including profitability of the group and at all times reflect the bank’s performance in a year.”

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Standard Chartered paid its former CEO Lamin Manjang Sh100.9 million. FILE PHOTO | NMG

Co-operative Bank said Mr Muriuki’s bonus was a reward for turning around the bank and growing it to Kenya’s third-biggest lender by earnings and assets size. The bank reported an 11.6 percent rise in net profit to Sh12.7 billion in the year, while KCB’s net earnings rose by 22 percent to Sh24 billion. Barclays Kenya chief executive Jeremy Awori took home a basic salary of Sh34.3 million, with bonuses and allowances totalling Sh66.8 million.

 

The other three bank executives in the top earners list had to contend with lower year-on-year pay packages.

Standard Chartered paid its former CEO Lamin Manjang Sh100.9 million, some Sh3 million lower compared to 2017. Mr Manjang left the Kenya unit in December 2018.

 

NIC Bank MD John Gachora was paid Sh95.9 million last year compared to Sh98 million in 2017, with his basic pay standing at Sh61.6 million.

 

NIC Bank managing director John Gachora. FILE PHOTO | NMG

 

Former HF managing director Frank Ireri, who left the home loans lender in March this year, was paid Sh64.1 million last year compared to Sh64.4 million in 2017.

The average employee of these six banks is, however, outstripped in earnings by their CEO by a factor of nearly 64 times. The median bank worker was paid on average Sh2.64 million or Sh220,200 per month.

In the wider market, the performance of the banks has contrasted with that of many other companies that have struggled to grow their bottom line in the face of a challenging economic environment. At least 15 listed firms issued profit warnings in 2018, which meant that full-year earnings would fall by at least 25 percent over the previous financial period.

Former HF managing director Frank Ireri. FILE PHOTO | NMG

 

The 15 firms were drawn from the energy, insurance, manufacturing and service sectors. Most blamed the drop in performance on lower purchasing power among their customers, energy costs and – in the case of insurers – an underperforming stock market.

Among the firms that declared a profit warning were East African Portland Cement Company, industrial gas producer Carbacid, Unga Group, Uchumi Supermarkets and Crown Paints. Others were insurers Sanlam, UAP Holdings and Britam, Kenya Power and Bamburi Cement. National Bank of Kenya and HF were the only banks on the list. KCB has initiated the process of buying out National Bank through a share swap.

Ideally, executive earnings should either come down or flatten in cases where there is performance-based bonus payments and the firms fail to do well.

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