Banking sector on an upward trend

Kenya’s banking sector improved between March and June 2015 supported by improved assets, loans and advances. The sector recorded increased balance sheet, according to data from the Central Bank of Kenya (CBK).
The improvements were propelled by foreign currency loans, government securities and placements as assets while loans and advances recorded increased uptake in all economic sectors except financial services, mining and quarrying sectors.
During the quarter ended 30th June 2015, the sector comprised 43 commercial banks, 1 mortgage finance company, 12 microfinance banks, 8 representative offices of foreign banks, 86 foreign exchange bureaus, 14 money remittance providers and 3 credit reference bureaus.
“The Kenyan Banking Sector’s performance improved with the size of total assets standing at Ksh. 3.60 trillion, gross loans worth Ksh. 2.17 trillion, while the deposit base was Ksh. 2.57 trillion and profit before tax of Ksh. 76.91 billion as at 30 th June 2015. Over the same period, the number of bank customer deposit and loan accounts stood at 31,570,749 and 6,033,279 respectively,” read the statement from CBK.
In terms of assets, the banking sector’s aggregate balance sheet grew from Ksh. 3.37 trillion in March 2015 to Ksh. 3.60 trillion in June 2015 indicating a 6.8 percent growth. The major asset components were local and foreign currency loans, government securities and placements which accounted for 58.0 percent, 20.4 percent and 5.3 percent of total assets respectively.
The sector’s gross loans and advances increased from Ksh. 2.04 trillion in March 2015 to Ksh. 2.17 trillion in June 2015, translating to a growth of 6.4%. The growth in loans was witnessed in all economic sectors except Financial Services and Mining and Quarrying sectors which reduced by 2.3 percent and 1.6 percent respectively.
Reduction in the loans and advances to the mining sector could be attributed to the increasing reforms by the ministry of mining which has seen some mining licenses revoked and fees increased hence stalling any growth or expansion intentions in the sector until concrete decisions are made on the issues. Investors prefer to be sure before risking to make decisions.
Profits were also on the rise in the banking sector. The CBK statement said
“The banking sector recorded Ksh. 39.61 billion pre-tax profits in the quarter ended June 2015, which was an increase of 6.2% from Ksh. 37.3 billion registered in the quarter ending March 2015. Similarly, total income of Ksh. 116.29 billion was generated in the 2nd quarter of 2015 being an increase of 5.7% from Ksh. 110.03 billion in the 1st quarter of 2015. On an annual basis, the profitability of the sector increased by 5.3% from Ksh. 37.61 billion registered in June 2014 to Ksh. 39.61 billion in June 2015.”
Interest on advances, other income and interest on government securities were the main sources of income accounting for 60.4 percent, 16.4 percent and 15.5 percent of total income respectively. On the other hand, interest on deposits, salaries and wages and other expenses were the major components of expenses, accounting for 35.6 percent, 26.6 percent and 22.4 percent of total expenses respectively.
CBK envisions the sector to stabilize further. It stated that
“The Kenyan banking sector is foreseen to remain stable and maintain an upward growth trend in the remainder of 2015. The growth momentum will be underpinned by on-going efforts by the Central Bank and the National Treasury to ensure a stable macro-economic environment.”


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