Kenya’s banking sector shows robust growth

by Elayne Wangalwa 0

Kenya’s banking sector has registered impressive results for the period ended 31 December 2014.

The country’s robust and stable banking industry has seen top lenders record a remarkable performance in their full year results. From Equity Group Holding’s 18 per cent pre-tax growth to Kenya Commercial Bank’s (KCB) 17.5 per cent and Barclays Bank of Kenya’s 10 per cent rise, the lenders continue to outperform in the industry.

The positive performance by the lenders signals of the country’s enabling economic environment as insinuated by the World Bank recently.

“If you look at Kenya, it stands out as one of the most diversified economies if you now add oil and gas to such, we would significantly see a powerhouse in the region,” James Mwangi CEO of Equity Bank said.

“Big in size and able to quickly transform itself and consolidate the growth opportunities so some optimists believe that with oil Kenya can easily achieve its vision 2030 target of 10 per cent GDP growth rate within the next three to four years.”

The lenders have cited a flourishing net interest income and growing returns on loans and advances.

KCB Group chief executive officer, Joshua Oigara said, “These impressive results are attributed to a double digit growth in our balance sheet as a result of growth in loans and advances.”

“We have continually focused on investment in innovation and technology, tapping alternative channels (KCB Mtaani agents, merchants, M-Benki, pepea transit card) and improving operational efficiency to boost growth. Going forward, these will remain on our radar screen.”

Moreover, to meet the growing demands in the banking sector, the lenders are turning to other channels like technology to further enhance growth of the banks in the long term.

Mwangi added, “We have been confronted by the same structure where we have to confront a technology refresh completely redesigning looking at the structure the organizational structure the human skills and positioning.”

“We are also very cognisant that we have to use technology to give us competitive advantage. We are investing in payment solutions and we have some very exciting innovative work underway,” Barclays Africa managing director Jeremy Awori said.

Meanwhile, Diamond Trust Bank (DTB), an affiliate of the Aga Khan Fund for Economic Development, is the latest bank to announce its results. The lender reported a growth of 17.8 per cent in its pre-tax profit to 8.52 billion Kenyan shillings.

DTB, which has a presence in east Africa said its net interest income grew by 16.2 per cent to 12.79 billion Kenyan shillings in 2014 driven by stronger loan book growth.

In addition, with the growth of the industry, the banks are looking forward to a vibrant year ahead as they continue with their expansion plans and diversification into new revenue streams remains a top priority.

Despite the growth in the banking industry, Daniel Kuyoh, research analyst at Kingdom Securities says that the performance for the period ended 31 December 2014 has risen marginally.

“We are beginning to see a slow in growth in terms of profit growth in the banks and a lot of this is because of rising expenses. A lot of them are going through transformational programmes so they are investing technology and so we are seeing an increased pressure on operational expenses,” Kuyo said.

“So the turn of it is that the profits are reducing in terms of growth and we are probably going to see the return on those investments in two to three years.”