Anon  |  Sep 24, 2018

According to a report by Cytonn Investments, the banking sector has shown positive growth in the first half of 2018. In this period, Kenya’s listed banks recorded a positive earnings per share growth of 19%, compared to a 14.4% decline in the same period in 2017. The sector also had an improved efficiency as the Cost to Income Ratio improved to 55.7% from 59.2% in the first half of 2017, amid cost rationalization measures such as branch closures and staff layoffs in voluntary retirement plans. On the other hand, listed banks recorded a slow net loans and advances growth to Kshs 1.94 trillion in H1’2018 from Kshs 1.90 trillion in H1’2017. Deposits grew at a faster growth 10% y/y to Kshs 2.5 trillion in H1’2018. Overall, the sector had an improved profitability y/y, as shown by the rise in the Return on Average Equity to 19.5% from 17.9% in H1’2017. This improvement is attributed to the following reasons:

  • Increased adoption of technology to improve efficiency

Banks have adopted technology to increase their operational efficiency. The use of mobile, internet and agency banking has led to the number of transactions via alternative channels exceeding those of bank branches. As a result, banks reduce their front-office operations, and the staff required to do them, ultimately reducing operating expenses and improving operational efficiency

  • Diversification to different revenue streams

Banks have continued to diversify their revenue sources, as they adapt to operating under the interest rate cap regime. Many have increased the fees and commissions on loans and ventured into various NFI growth ventures such banc assurance. NFI was also earned from transactional income obtained as the number of transactions increased buoyed by increased adoption of alternative channels of transactions

  • Economic recovery

The ongoing economic recovery will lead to improved demand for credit from sectors affected by the economic slump witnessed in 2017 due to political uncertainty and severe drought. Increased credit extended to sectors such as agriculture, real estate, manufacturing and trading presents interest income growth opportunities.


Read the full report here.

Budget Brief 2018/19

Stephanie Onchwati - 3 months ago