National Bank of Kenya’s 38th annual general meeting was held on Friday June 22 2007 at KICC. The bank has been profitable for the last few years but has not been able to pay dividends to long suffering shareholders owing to an accumulated deficit from past losses.

some highlights

The debt and (no) dividend has dominated any discussion about NBK and following the government settlement of their debt via Kshs 20.3 billion in bonds, spread out over 15 years, there was some optimism that the shareholders would finally get their due. Their auditors (Deloitte) have raised this matter of emphasis for several years as NBK has continued to claim interest on these government initiated loans with the understanding that it was sovereign debt to be settled one day (which has now happened).

However in a long statement by the chairman (Mr. Muhindi), he mentioned that they were still not in a position to pay dividends and shareholders should not dwell on the matter. He mentioned that NBK’s share price had appreciated by over 30 shillings in the past year, and to any share trader, that was more than any Kenyan company paid in dividends last year.

Unfortunately the dividend issue came up and even the first three shareholders all asked about it among the many questions they posed. The Chairman mentioned that the banking act, companies act, and NBK articles all forbade payment as long as there was a deficit in the revenue account – and that the government bond would not wipe out the deficit, only profits can do that which may not take another four years

bad debts NBK collected 503 million shillings in bad debts which was up from 403m the year before. He said they have still not scratched the surface as many of their cases were still in court.

privatization of NBK was mentioned in the budget last week; however the board does not know more than what was in the media. I.e. that GoK and NSSF would sell their shares either to the public or a strategic partner. On merger possibilities the board would consider the right merger opportunity if it came up (but not for share capital reasons)

other shareholder Q’s

corporate social responsibility NBK assisted in the famine relief program last year, set up a ward at Kenyatta hospital, assisted schools for orphans in Mombasa and is building a kitchen for Mbagathi hospital.

directors why should directors get allowance when we have no divided and some directors don’t even attend meetings?

who got paid? a small amount of dividend (174,000 shillings) was paid in 2006 and shareholders wanted to know to who! Management stated that the correct term should be dividend collected – as some shareholders still have not claimed their dividends (last paid in 1997 and amount totaling 271 million)

what is statutory reserve it is a new rule for all banks in Kenya that even for performing portfolio, 3% must be set aside to provide for any eventual bad debts.

path to dividends: Responding to the umpteenth question on dividends, the MD (Mr. Marambii) stated that there were two ways to get NBK shareholders back on the path to dividends (i) one was to accumulate profits to pay off the deficit – which could take several years or (ii) was rot approve a reduction in the banks capital which would wipe out the deficit. Going forward any profits thereafter could be applied to dividends. He said that shareholders had rejected such a move a few years before but the board was leaning towards bring the option back to the table

goodies NBK tote bag only and lunch. Some shareholders not happy said that the company could have also given a t-shirt while another suggested that they could have saved the money spent on the bags, cold lunch, and printing the annual reports (mgmt: says they cost 60/= each) and paid dividend instead. I did not stick around for lunch which looked like it was going to be a chaotic buffet