Philip Ngunjiri, Special Correspondent
20 March 2007
Nairobi — According to the just released trading results, big banks in Kenya registered impressive financial growth for the year ending December 2006.
The three top banks, Barclays Bank of Kenya (BBK), Standard Chartered Bank Kenya and the Kenya Commercial Bank (KCB) realised over half of all the banking industry's profits.
The largest bank in terms of branch network, KCB, which was the last to release its trading results, posted the most impressive financial growth of 63 per cent while Barclays - the biggest bank in terms of customer deposits - was the most profitable bank. It recorded a pre-tax profit of Ksh6.4 billion ($91.4 million), the second highest figure ever recorded by a listed firm at the Nairobi Stock Exchange (NSE).
The East African Breweries Ltd (EABL), which posted Ksh8.6 billion ($122.9 million) pre-tax profit last year, made the most profit.
Though StanChart recorded only 9 per cent financial growth, it was the second highest profitable financial institution in Kenya. The bank realised a pre-tax profit of Ksh3.8 billion ($54.3 million).
By November 2006, the banks' total pre-tax profits had risen by 39 per cent to Ksh42.8 billion ($611.4 million), up from Ksh17.9 billion ($255.7 million) recorded in 2005.
Most banks have attributed these profits to an increase in interest income on loans and advances, earnings from government securities and non-funded income.
And, according to the Central Bank of Kenya (CBK), the banking sector's windfall was as a result of the country's economic stability.
"The banking sector improved its asset quality and retained high capital adequacy ratios. The improved performance resulted from increased income on loans and advances," says CBK in its monthly economic review for December 2006. The sector also achieved growth in deposits and profitability, added the report.
The private sector increased its borrowing by 16.3 per cent while lending to the government increased by 17.7 per cent. Most of the borrowing was done in Kenya shillings, helping the stock of loans retained in shillings to grow almost threefold - 15.7 per cent more than the stock of foreign currency loans, which rose by 5.9 per cent.
KCB's extensive rural branch network was the envy of other banks. Regionally, the bank opened two branches in Juba and Rumbek in Southern Sudan. By the end of this year, the bank will open a branch in Uganda and later in Rwanda.
BBK announced expansion plans including reopening branches that were closed a few years ago. Not to be left behind, StanChart launched several new products, including accounts aimed at women (Diva) and children and adult savings (Safari) accounts. This paid off as customer deposits grew by 9 per cent to Ksh64.9 billion ($927.1 million).
KCB's pre-tax profits rose to Ksh3.167 billion ($45.2 million) in 2006, up from Ksh1.9 billion ($ 27.4 million) in 2005.
"We are very encouraged to see that we have had growth across all revenue lines," KCB chief executive officer Terry Davidson told an investor briefing last week. The bank's total operating income grew 25 per cent to Ksh11.75 billion ($167.9 million) in 2006 while total operating expenses rose 14 per cent to Ksh7.83 billion ($111.9 million).
Following this impressive growth, the bank has proposed a dividend payment of Ksh6 per ($0.085) ordinary share held, a 50 per cent increase from 2005. According to Mr Davidson, a 23 per cent rise in net interest income helped boost the profit margins, riding on the back of the Ksh8.9 billion ($127 million) increase in KCB's loan book from Ksh36 billion ($ 514.3 million) to Ksh45 billion ($642.9 million).
"We are very excited by the trend in our performance over the past few years, which reflects growth in all segments of the business," he said.
Total assets also rose by 18 per cent during the period with net loans and advances increasing by 25 per cent due to additional lending and an increase in performing loans. Total operating income increased by 25 per cent from Ksh9.4 billion ($134.3 million) in 2005 to Ksh11.7 billion ($167.1 million) in 2006.
The bank's gross non-performing loans reduced to Ksh12.09 billion ($172.7 million) from Ksh13.25 billion ($189.3 million) in 2005. Total operating expenses increased by 14 per cent due to increased business activities, operations and investments in information technology, staff training and marketing.
Following the growth, the value of the group's shares on the NSE rose more than Ksh100 ($1.4) from Ksh113 ($1.6) in 2005 to Ksh220 ($3.1), making the bank's shares unaffordable. For this reason, Mr Davidson indicated the approval of a share split by the board at a ratio of 1 to 10 shares, subject to regulatory and shareholder agreement.
Barclays will retain at least Ksh2.5 billion ($35.7 million) from its profits to finance an ambitious expansion whose centrepiece will be the growth of the branch network from the current 62 to over 100 during the year.
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