Staff costs trend up as banks fight to slow expenses
Equity Bank CEO James Mwangi. The lender saw its staff costs decline by to Sh10.29 billion from Sh10.77 billion in 2014. PHOTO | FILE
Banks registered a mixed trend in employee cost management last year even as they remained under pressure to manage costs and maintain the profit trajectory of recent years.
The recently released banking sector financial results show that among the top 10 banks by market share (which control 67 per cent of the total banking industry), the staff cost increases differed significantly, rising by as much as 20 per cent for NIC Bank and falling by 4.5 per cent in the case of Equity Bank.
The average cost increase for these lenders was about eight per cent. CBK data shows the industry average staff cost increase for 2014 stood at nine per cent, having gone up to Sh75.37 billion from Sh68.8 billion in 2013.
Equity Bank, which announced that its head count fell by 660 last year, saw its staff costs decline by to Sh10.29 billion from Sh10.77 billion in 2014.
The only other top 10 lender to announce a fall in staff costs was National Bank of Kenya, from Sh3.7 to Sh3.6 billion.
“We benefited from a four per cent drop in staff costs reduction because natural attrition saw 660 staff exit. This year we expect a reduction on staff cost by five per cent,” said Equity Bank’s chief executive James Mwangi when presenting the bank’s financial results last month.
Among the six top-tier lenders, Commercial Bank of Africa had the largest staff cost increase at 19.1 per cent from Sh2.7 billion to Sh3.2 billion. CBA, associated with the Kenyatta family, is the largest privately owned bank in Kenya with a presence in Uganda and Tanzania.
The bank plans to be present in 16 markets in the next 10 years targeting Rwanda, Burundi, Ethiopia, South Sudan, the Democratic Republic of Congo, Malawi and Mozambique.
Barclays Bank saw its cost rise by 14.8 per cent to Sh9.3 billion, KCB’s by 9.4 per cent to Sh15.31 billion while the staff costs of Standard Chartered rose by 8.6 per cent to Sh6.1 billion.
Cooperative Bank staff costs rose by 5.4 per cent to Sh8.9 billion even as the bank said staff numbers declined by 400 which saw the lender’s total cost to income ratio improve to 24.5 per cent from 26.3 per cent.
Banks have been turning to cost management in order to improve their profit margins and have increasingly been leaning on alternative banking channels as a means of reducing their personnel costs.
“Banks have embraced low-cost operating models such as agency banking, integration with mobile application platforms and internet banking.
The use of alternative channels will reduce operating expenses and improve efficiency and will be a key driver for diversification,” said Cytonn Investments in its 2015 banking report for the 2015 financial year.
Cooperative Bank in September last year started stationing agents inside its branches hoping to eventually woo customers from banking halls and encourage them to use alternative channels.
Family Bank on its part rolled out a campaign aimed at doubling the number of its agency banking merchants to 10,000 by yearend. The mid-tier bank is also looking to optimise service channels that include ATMs, mobile banking and Internet banking.
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Note: The results are not exact but very close to the actual.
