Kenyan banks let go of 1,620 staff in 2017 as they took proactive measures aimed at increasing operational efficiency in response to a challenging operating environment, Kenya listed FY 2017 report by Cytonn Investments says.
Equity Group led the pack with 400 staff leaving the bank with Standard Chartered Bank retrenching 300 workers.
Barclays Bank of Kenya comes next after retrenching about 300 followed by KCB Group at 223.
Others include National Bank at 150, Sidian Bank at 108 and First Community Bank at 106, and NIC Bank at 32 among others.
The reduction of staff took the shape of Voluntary Early Retirement Programs and the ‘re-allocation of resources’ in an increasingly digitized environment.
The number could be higher if the report had specified numbers for I&M Bank, Eco Bank and Bank of Africa.
“The focus for the banking sector in 2017 was on adjusting business models to conform to the Banking (Amendment) Act 2015. To this effect, banks took proactive measures aimed at increasing operational efficiency in response to the challenging operating environment, such as laying off staff, closure of branches, reviewing operating hours for some branches, or outright sales in the case of struggling Tier III banks,” the report states.
During the same period, 39 branches were closed with Bank of Africa closing the most branches at 12 followed by Eco Bank at 9, Equity Group and Barclays Bank of Kenya closed 7, while Standard Chartered closed four branches.
Going forward, according to the report, we are likely to witness banks’ push for efficiency gather pace to balance off the expected reduction in absolute profitability as they shy away from the physical branch model, which is very expensive compared to other alternative channels such as digital platforms.
“With banks registering compressed net interest margins following the capping of interest rates, much of the attention has shifted to diversifying income, through non-funded income, as this section of the bank’s revenue is not affected by the interest rate caps,” the report notes.
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Non-funded income (NFI) has grown by 9.1% in 2017, compared to the 5-year average growth of 8.1%, taking its contribution to total income to 33.6%, from 31% registered in FY’2016, compared to the 5-year average contribution of 33.4%.
“We expect this to continue going into 2018, as banks seek alternative sources of income to boost profitability. We believe revenue and product diversification is one of the core opportunities for the banking sector,” the report indicates.