As the banking sector continue to wade through a financial maelstrom, Co-operative Bank of Kenya on the hand has overtaken Standard Chartered Bank when ranked in terms of return on equity for shareholders. According to statistics released by Cytonn Investments, Co-operative Bank also came ahead of Backlays Bank, NIC Bank as well as Diamond Trust Bank on Return on equity.
Co-operative Bank took the second position after Equity Bank which, despite drifting back 29 percent, the lender retained the highest position as in terms of return on equity at 25.5 percent while Co-operative Bank had 25.1 percent.
I&M bank came in top in terms of the growth in the earnings per share scooping 26.2 percent and also took credit as the fastest growing bank. Kenya has more than 40 banks and with a population of slightly 40 million people, some schools of thought have argued that the country is overbanked. Some have called on the regulator, Central Bank of Kenya, to try and consolidate the banks so as the country has a few banks but strong ones as opposed to having many banks with a week banking base.
According to the report, Kenya banks recorded much lower earnings growth, driven by the challenging economic environment in 2015, with the high interest rates which reduced credit uptake especially by the private sector. The report added that the interest rates rose in the fourth quarter of last year after the Central Bank of Kenya (CBK) raised the benchmark policy rate in a span of a few months to 11.5 from 8.5 per cent.
This came even as some reputable banks like National Bank of Kenya recorded losses of 1.2 billion shillings, blaming it on high nonperforming loans raising eyebrows among the banking sector. Despite the fact that the Kenyan banking sector is thriving, economic analysts are warning that with the recent happenings in the sector where some banks are making losses and some placed under receivership, customers are likely to lose confidence.
Article by Juma Fred.