29 March 2014

Kenya: Top-Tier Lenders Splurge Money On Staff, Directors

Top-tier banks splurged money on board members and staff, pushing up their costs in tandem with increases in profits after-tax.

The lenders, all listed on the Nairobi Securities Exchange, registered higher operating expenses in 2013 driven by increments in board emoluments and staff costs as a result of industry-wide hunt for top talent.

Banking sector profits have soared amid high lending rates averaging about 18 per cent. Deposit rates are below the Central Bank's benchmark of 8.5 per cent while inter-bank rates have also dropped to levels last seen in May 2011 before the money markets went hay-wire, meaning banks are accessing cheap funds for onward lending.

Central Bank data shows the average inter-bank rate declined to 5.36 per cent last week. The inter-bank rate had hit nearly 30 per cent in November 2011.

Only Barclays Bank out of the five top-tier lenders reduced payout to its board members in a year that its net profit also grew at a slower pace. The foreign-owned bank was overtaken by indigenous ones such as Co-operative in profitability.

KCB Group, the most profitable in the year, paid its 11 directors who include the chief executive and chief financial officer Sh197.40 million which was Sh25.84 million higher than a year before.

Its staff costs increased to Sh13.47 billion from Sh11.86 billion, a 13.6 per cent jump. These costs pushed up the lender's total operating expenses to Sh29.97 billion in the review period from Sh29.05 billion. Its net profit rose by 17.5 per cent to Sh14.34 billion from Sh12.20 billion.

Homegrown lender Equity Bank paid its board members a near-flat Sh27.75 million compared to Sh26.89 million in 2012. Staff costs rose sharply to Sh9.02 billion from Sh7.15 billion a year before, pushing its total operating expenses 16 per cent up to Sh22.71 billion from Sh19.58 billion.

Equity was the second most profitable in 2013 with Sh13.28 billion from Sh12.08 billion in 2012.

Standard and Chartered paid its directors Sh142.36 million, a 14.7 per cent increase from Sh124.14 million, while its staff costs rose to Sh4.96 billion compared to Sh4.53 billion in the previous year. The top-tier lender's total expenses jumped to Sh10.47 billion from Sh9.46 billion. It posted a 14.7 per cent rise in net profit to Sh9.26 billion from Sh8.07 billion in 2012.

Co-operative Bank paid its 12 board directors Sh131.73 million up from Sh83.55 million a year before, a 36.6 per cent jump. Staff costs also increased 31.3 per cent to Sh8.01 billion last year from Sh6.1 billion.

Its total operating expenses rose to Sh5.63 billion from Sh4.71 billion in 2012. Co-op's after-tax profit rose to Sh9.11 billion from Sh7.72 billion, a 18 per cent rise.

Barclays Bank is the only bank that slashed its payout to board directors last year, 12.8 per cent down to Sh15.24 million from Sh17.47 million in the previous year. However, its staff costs rose slightly to Sh8.11 billion from Sh7.81 billion. The lender's total operating costs increased to Sh16 billion from Sh14.4 billion a year before.

Barclays' after-tax profit slowed to Sh7.62 billion from Sh8.74 billion, a 12.8 per cent drop, seeing it overtaken by Co-operative in profitability.

While most of the lenders either maintained or increased their dividend payout, Barclays bucked from the trend and slashed its dividend per share to Sh0.70 from Sh1 for 2012.

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