Barclays is 2nd ‘Best’ After KCB in Asset Quality and Net Interest Margin

Barclays Bank has been ranked as the second best after KCB Group among the listed financial institutions in Kenya.

Cytonn Investments Cytonn Q3’2017 Banking Sector Report said Barclays climbed up 4 spots to position 3 from 7 in their half year 2017 Banking Sector Report “Due to impressive Net Interest Margin (NIM) at 9.7 percent, above the industry average of 7.5 percent, and good asset quality, registering a gross NPL ratio of 6.8 percent, the second best among the listed banks, and below the industry average of 12.3 percent.”

In the report,KCB Group and Coop Bank maintained 1st and 2nd, as Kenya’s most attractive banks based on the strong franchise value and the intrinsic value score.

The franchise score measures the broad and comprehensive business strength of the company across 13 different metrics, and the intrinsic score measures the investment return potential.

Equity Bank Group moved up 1 position to 4th , while NIC Bank moved down 1 position to 5th from H1’2017.

Diamond Trust Bank dropped 3 spots to Position 6 from Position 3 in the H1’2017 Banking Sector Report, due to deteriorating asset quality, with the gross NPL ratio coming in at 8.0 percent, compared to 4.6 percent in H1’2016, as well as poor diversification, with Non-Funded Income (NFI) contributing only 21.2 percent of the total operating income, compared to an average of 31.0 percent.

Stanbic Bank and KCB Group recorded a growth in core earnings per share out of the eleven Kenyan listed banks.

According to Cytonn “The average decline in core earnings across the banking sector is at 8.2 percent, compared to an average growth of 15.1 percent in Q3’2016, owing to the tough operating environment as a result of the interest rate caps and political uncertainty in the country that affected the business environment.”

“Prudence and efficiency will prove to be key in the Banking sector, in the wake of a tough operating environment, following the deteriorating asset quality, coupled with the capping of interest rates, which has seen banks record decreased profitability in 2017,” notes the report.

“The challenging operating environment is further underpinned by the coming into effect of IFRS 9 and Basel III, which will require banks to embrace both prudence and efficiency in order to be compliant and enhance profitability, which we believe will lead to a more stable and robust sector.”

Read: IFRS 9 will Introduce a new normal for the banking sector – Jeremy Awori