A Look at the General Performance of Kenya’s Listed Banks in 2018

Listed Kenyan banks recorded a 13.8 percent average increase in core Earnings Per Share (EPS), compared to a decline of 1.0 percent in FY’2017.

The Return on Average Equity (RoAE) for listed banks in Kenya increased to 19.0 percent from 17.6 percent in FY’2017.

All banks apart from HF Group recorded growths in their core EPS, with Stanbic Holdings recording the highest growth of 45.7 percent, and the lowest being HF Group, which recording a loss per share of 1.7 shillings.

The sector recorded weaker deposit growth, which came in at 10.3 percent, slower than the 12.5 percent growth recorded in FY’2017.

Despite the slower deposit growth, interest expenses increased by 10.6 percent, indicating banks have been mobilizing expensive deposits.

However, with the removal of the limit of interest payable on deposits, the associated interest expenses on deposits is expected to improve in 2019, and possibly improve the cost of funds.

Average loan growth came in at 4.3 percent, which was lower than the 6.1 percent recorded in FY’2017, indicating that there was an even slower credit extension to the economy, due to sustained effects of the interest rate cap and the relatively tougher operating environment.

Government securities on the other hand recorded a growth of 9.1 percent y/y, which was faster compared to the loans, albeit slower than 22.2 percent recorded in FY’2017.

Interest income increased by 6.4 percent, compared to a decline of 2.4 percent recorded in FY’2017, as increased allocations to government securities bore fruit.

The Net Interest Income (NII) thus grew by 2.5 percent compared to a decline of 3.8 percent in FY’2017.

The average Net Interest Margin in the banking sector currently stands at 7.9 percent, down from the 8.4 percent recorded in FY’2017, despite the Net Interest Income increasing by 2.6 percent y/y.

The decline was mainly due to the faster 9.1 percent increase in allocation to relatively lower yielding government securities, coupled with the decline in yields on loans due to the 100 bps decline in the Central Bank Rate (CBR).

Non Funded Income grew by 3.8 percent y/y, slower than 9.1 percent recorded in FY’2017.

The growth in NFI was weighed down as total fee and commission declined by 1.0 percent, compared to the 13.4 percent growth recorded in FY’2017.

The fee and commission income continued to be subdued by the slow loan growth, coupled with the implementation of the Effective Interest Rate (EIR) model under IFRS 9, which requires banks to amortize the fees and commissions on loans, over the tenor of the loan.