No Kenyan Listed Bank recorded core EPS in H1’2017

Kenyan banks have posted reduced earnings in half year results ended June 2017  following interest rate caps introduced last September.

“Of the 9 listed banks that have released their H1’2017 results, none has recorded a growth in core earnings per share, with the average decline in core earnings across the listed banking sector at 11.3 percent,” according to Cytonn investments weekly brief.

“This is a significant decrease compared to the average growth of 12.7 percent registered for H1’2016.”

According to Cytonn, the sector has  experienced faster loan growth and all banks showed efforts to protect their Net Interest Margins given that in this half year the full effect of the law capping interest rate was in effect.

Banks also reported increased lending with the average loan growth at 12.9  percent compared to a growth of 8.3 percent in H1’2016.  

“The sector has experienced slower loan growth, which in turn led to reduction of their Net Interest Margins. Despite the growth in the loan book the private sector credit growth remains low, and was at 2.1 percent in May 2017, which is an 8-year low. The loan to deposit ratio remained relatively unchanged at 80.7 percent compared to 80.8 percent in H1’2016.,” says Cytonn.

The 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.

In H1’2016, the sector recorded a 15.8 percent core EPS growth, with all banks recording double digit growth except NIC Bank, Barclays Bank and National bank which grew at 2.9 percent, (10.2%) and (70.0%), respectively. Further,during the period, they registered high growth in non-performing  loans, with the NPL ratio at  6.7 percent in H1’2016
Compared to 3.5 percent in H1’2015.

Kenya capped commercial banks’ lending rates last November at 4 percent above the Central Bank Rate (CBR), which currently stands at 10 percent and further set a minimum interest rate for deposits in interest-earning accounts.

Before the law, lending charges stood at between 19 percent and 27 percent, with proponents of capping then noting that banks were exploiting their customers through their high rates to make billions of dollars in profits.