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Kenyan Listed Banks Witness 8.6pc decline in core EPS in Q1’2017

BY David Indeje · June 19, 2017 09:06 am

Kenyan listed banks recorded an 8.6 percent decline in core earnings per share (EPS) in Q1’2017 compared to a growth of 13.6 percent in Q1’2016.

According to Kenya Listed Banks Q1’2017 Report released by Cytonn Investments, all the banks recorded negative growth except for Diamond Trust Bank, which recorded a growth of 8.8 percent due to flat performance in NII, meaning it was the least affected bank in Q1’2017 following the capping of interest rates.

Deposits grew at a faster rate than loans during the first quarter of the year, which is the reverse of what was witnessed in Q1’2016. The loan growth came in lower as private sector credit uptake slumped to 4.0 percent in Q1’2017, with banks adopting a more prudent credit risk assessment framework to ensure healthy loan books, which saw the loan to deposit ratio drop to 81.2 percent from 85.1 percent in Q1’2016.

Despite the Banking Act (Amendment) 2015, banks managed to preserve their net interest margins (NIM) in Q1’2017, which declined marginally to 9.2 percent from 9.3 percent in Q1’2016, despite net interest income (NII) declining by 11.3 percent.

Exposure in government securities rose to 30.0 percent from 26.0 percent in Q1’2016 as banks allocated more funds towards the government following the capping of interest rates, depriving the private sector of credit in the process.

The increase in the gross non-performing loan (NPL) ratio to 11.6 percent from 8.1% in Q1’2016, highlights increased risks around asset quality in the sector, with banks having taken a prudent approach with the adoption of IFRS 9.

Listed banks recorded a decline on return on average equity to 16.8 percent from 17.6 percent in Q1’2016, as the bank’s’ profitability was affected by the capping of interest rates, which suppressed net interest income in the first quarter of the year.

David Indeje is a writer and editor, with interests on how technology is changing journalism, government, Health, and Gender Development stories are his passion. Follow on Twitter @David_Indeje David can be reached on: (020) 528 0222 / Email: info@sokodirectory.com

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