Average personal loan rates climb to 18.3pc in Dec
The Central Bank of Kenya published a list of lending rates charged by banks last week. PHOTO | FILE
What you need to know:
The rise in average price of loans has now seen the interest margins earned by banks rise to 10.38 per cent, taking account of the average fixed-deposit rate of 7.92 per cent as at the end of December 2015.
Average bank lending rates have shot up by 2.2 percentage points over the past six months to 18.3 per cent, with some banks loading onto personal loans a premium of 15 per cent above the Kenya Banks Reference Rate (KBRR).
New data from the regulator shows that the rise in average price of loans has now seen the interest margins earned by banks rise to 10.38 per cent, taking account of the average fixed-deposit rate of 7.92 per cent as at the end of December 2015.
The deposit rate is paid on fixed long-term funds, while the rate for normal savings account stands at a paltry 1.56 per cent.
At the end of last week, the Central Bank of Kenya (CBK) published a list of the various lending rates charged by banks on personal, business and corporate loans, as CBK governor Patrick Njoroge ramped up pressure on commercial banks to bring down their lending rates.
The rates that the CBK published are however not inclusive of other charges such as administration fees, processing fees, valuation fees, legal fees and commitment fees.
“As a result, the actual rates charged by the banks may be higher or lower than the published average rates. The actual rates are based on negotiations between the bank and the borrowing customers,” said the CBK in a statement accompanying the published rates.
From the CBK data, Middle East Bank had the highest average lending rate of 24.6 per cent followed by K-Rep which averaged 24.2 per cent while Housing Finance had the lowest at 15.2 per cent.
Chase, Family and Citi charged 15.5 per cent on average. In last month’s Monetary Policy Committee meeting, the CBK overlooked the current formulation structure for the KBRR and chose to retain it at 9.87 per cent, instead of raising it to 10.78 per cent as would have been the case after taking into consideration T-bill price movements between July and December 2015.
Instead, the CBK is mulling the development of a new formula for setting the minimum lending rate for commercial banks.
The governor has especially targeted the large banks which enjoy cheap deposits and lower operational costs.
“The increase is more pronounced among large banks which have liquidity and that is more troubling,” said the governor in a briefing last month.
According to the CBK data, the top-tier banks such as KCB, Equity, Standard Chartered and Commercial Bank of Africa (CBA) all increased their loan rates at a pace higher than the industry average of 2.2 percentage points between June and December, even though some are still lending at below industry average of 18.3 per cent.
StanChart’s average lending rate rose by 4.1 percentage points to 17.3 per cent over the period, followed by Equity Bank at three percentage points to 19 per cent.
CBA and KCB increased their lending rates by 2.9 and 2.4 percentage points to 19.6 and 17.3 per cent respectively.
Barclays was one of only six banks across the industry that reduced their average lending rates over the half-year period, cutting 1.6 percentage points to 18.5 per cent. Cooperative Bank’s increase came in below the industry average at 1.6 percentage points to 17.5 per cent.
Among the mid- and bottom-tier banks, the biggest increment in lending rate came from Guardian Bank, with the lender more than doubling its rate from 7.2 to 15.6 per cent between June and December last year.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
