Banks justify bonus payouts

Bankers Association of Malawi (BAM) says the criteria by commercial banks for bonus eligibility and the formulas used to calculate those bonuses are specific to individual banks’ employee rewarding systems.

BAM’s sentiments come in the wake of mixed reactions on bonus payouts in excess of K6 billion by some Malawi Stock Exchange-listed banks, which have posted buoyant results this year.

In an interview on Monday, BAM chief executive officer Lyness Nkungula said while meeting budgets and in line with employee performance, the bonus policy is different from one bank to the other.

She said: “Firstly, we must consider the overarching influence of company performance. A thriving business with surging profits is typically more capable of distributing generous bonuses to its staff.

“The broader economic climate and market conditions are also taken into consideration.”

Published financial data for the period ending December 31 2023 shows that National Bank of Malawi (NBM) plc, which has posted a profit-after tax of K71 billion, a 56.6 percent jump from the previous year, will dish out staff bonus amounting to K6.1 billion.

On the other hand, Standard Bank (Malawi) plc, which posted a 34 percent profit after-tax jump to K52.5 billion, will pay K3.1 billion in staff bonuses to its employees.

NBS Bank plc posted a 55 percent profit after-tax jump to K29.38 billion and staff will get bonuses amounting to K5.5 billion.

But Minority Shareholders Association of Listed Companies secretary general Frank Harawa said while they are excited with the performance, they will engage the banks on their rewarding system and establish if it is equitable.

“We want to see everyone happy and that includes us [shareholders].  We believe that with the results, there will be capital gains as share prices will be going up,” he said.

In a separate interview, banking and finance expert Misheck Esau observed that if these bonuses are in line with the agreed formula, it is right to pay them regardless of the level of profits.

He said: “We do not change the rules after the game is over. If the bonuses payable were tied to targets and these targets have been achieved, bonuses must be paid.

“Capping bonuses goes counter to the principle of creating bonuses. Boards and shareholders alike require star performance to increase stakeholder value.”

Esau said there is no need to start capping bonuses because a bank has achieved super profits or because the economy is in bad shape.

Human resources analyst Bright Limani observed that with the profits of such magnitude, the bonuses are on the lower side.

He said: “I believe that the bonuses must be in line with current realities.

“With devaluation and inflation on the rise it is vital to revise them.”

The banking sector posted healthy profits in 2023 amid the challenging economic environment.

Published World Bank data shows in 2023, the banking sector’s profit after-tax increased by 50.2 percent to K 256.7 billion.