By Bedah Mengo NAIROBI, (Xinhua) --
Major Kenyan banks’ earnings fell in the first nine months of the
year, highlighting the heat from interest caps introduced a year ago.
Out of at
least eight banks that have declared their financial results in the last week,
seven registered declined profits, mainly blamed on the interest ceilings
intended to boost access to credit, especially among small businesses.
affected lenders are Barclays Bank, NIC Bank, Kenya Commercial Bank, Stanbic
Bank, Diamond Trust Bank, Equity Bank and Standard Chartered Bank.
recorded decline in interest income mainly due to reduced lending, which hurt
their overall income.
financial statement released on Tuesday shows that total operating income
declined by 19 percent to 98 million U.S. dollars, from 122 million dollars.
income fell to 121 million dollars, from 147 million dollars.
is attributable to a 16.1 percent decline in interest income on loans and
advances to 88 million dollars from 110 million dollars, despite an increase in
interest income on government securities by 14.3 percent,” the bank said.
scenario was recorded by Barclays Bank, whose interest income declined by 5
percent in the first nine months of the year to 188 million dollars, from 204
million dollars of the same period in 2016.
despite the loan book recording a 5.3 percent growth, implying that the decline
was an effect of the interest-rate cap.
Bank, its results indicated that its profit before tax decreased by 17.4 percent
to 3.8 million dollars, from 5 million dollars in the same period last year,
driven by a 7.6 percent increase in operating expenses amid low income.
income decreased by 7.3 percent to 120 million dollars, from 130 million dollars
in a similar period in 2016.
attributable to low income from loans and advances and a drop in earnings from
decline in core earnings across the banking sector stood at 6.5 percent, 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,”
said analysts at Cytonn, a Nairobi-based investment firm.
have shifted to government securities, with lending to the government by all the
17 reporting banks going up to 608 million dollars in the period.
government securities has grown by 16 percent, outpacing loan growth of 6.3
percent, showing increased lending to the government by banks as they avoid
risky borrowers, noted Cytonn.
African nation introduced the law to cap interest rates in the third quarter of
2016, with the move aimed at deepening access to credit especially among small
were capped at 4 percent above the Central Bank rate, which was last week
retained at 10 percent.
banks, therefore, are currently charging borrowers a maximum of 14 percent, down
from between 18 and 28 percent.
banks are reeling from the effects of the reduced earnings as the law has led to
shrinkage of income since the institutions cannot price loans using their own
margins as was in the past,” said Henry Wandera, an economics lecturer.
“If the law
is not repealed as banks are pushing, the sector may register reduced expansion,
which means less jobs and less circulation of money in the economy,” Wandera
decline in profit, Kenyan banks have resorted to several measures aimed at
increasing efficiency in response to the challenging operating environment.
staff layoffs, closure of branches, reviewing operating hours for some branches,
or outright sale in the case of small banks.
employees from 11 banks have lost their jobs as the institutions restructure
operations and embrace internet and mobile banking.