NAIROBI, Kenya
Kenya’s banking sector’s profit before tax rose by 15.6 per cent for the period ended June this year buoyed by a drop in interest paid on deposits as lenders encouraged customers to use bank agents who are offering added convenience while saving the banks costs.
Data released by the Central Bank of Kenya (CBK) on Monday shows that the banking sector’s profit before tax hit Ksh61.5 billion ($715 million) for the period ended June this year up from Ksh53.2 billion ($631.5 million) posted for the period ended June 2012. The growth in profits, which has already been reflected by Equity Bank, East Africa’s largest bank in terms of deposit accounts which released its results last week, is also expected to be reflected in other large listed banks such as Barclay Bank, CfC Stanbic, Standard Chartered and Cooperative Bank.
Barclays Bank and National Bank of Kenya are expected to release their results this week, giving investors a glimpse of how their strategies have helped them navigate through a season when interest rates were on a downward trend. “The banking sector is expected to sustain its growth momentum on the backdrop of a stable macro-economic environment, domestic and regional expansion by banks and the increased economic activities through the devolved system of government,” said CBK in a statement.
The number of banks with agents rose to 13 during the period ended June this year from 10 during the period ended June last year while the number of agents in the banking sector rose by 63.01 per cent to 19,649 from 12,054 over the same period of time. Agents performed 58.6 million transactions valued at Ksh310.5 billion ($3.6 billion) over the first six months of this year almost three and a half times more than the 18.7 million transactions valued at Ksh93.1 billion ($1.1 billion) performed in the first six months of last year.
Equity Bank last week said that the use of agents, who stood at 7,632 is providing a cheaper avenue for the mobilisation of deposits. The bank, which said that the model is also being rolled out in Rwanda and Tanzania, is not making significant capital expenditure, spending on rent or staff costs and is only paying commissions to the agents. CBK said that Kenya’s banking sector’s loan book rose by 15.38 per cent to Ksh1.5 trillion ($17.4 billion) as at the end of June 2013 from Ksh1.3 trillion ($15.4 billion) as at the end of June 2012.
Deposits rose by 11.76 per cent to Ksh1.9 trillion ($22 billion) from Ksh1.7 trillion ($20.1 billion) over the same period of time. The contribution of interest income from loans and advances to total income had dropped by 4.2 percentage points to 57.8 per cent as at the end of June this year from 62 per cent as at the end of June last year. This came after a slight decline of lending rates which came after a 9.5 percentage point cut in the Central Bank Rate to 8.5 per cent between January and June this year.
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