An Ecobank branch in Nairobi. The bank has been offloading expensive deposits which have seen its customer savings shrink. Photo/FILE
What you need to know:
Ecobank has been dropped from mid-sized class due to fall in market share to less than one per cent.
The bank has a market share of 0.95 per cent.
The bank recorded a loss of Sh890 million after tax last year which was an improvement from Sh1.1 billion loss the previous year.
The Central Bank of Kenya (CBK) has downgraded Ecobank to a small-sized lender in spite of huge capital injections by its Togo-based parent company.
The bank was dropped from the mid-sized category following a shrink in its market share to less than one per cent.
Banks are classified into three groups using an index calculated using assets, deposits, capital and the number of loan and deposit accounts.
“A bank with a weighted composite index of five per cent and above is classified as large; a medium bank has an index of between one and five per cent while a small bank has less than one per cent,” said CBK in its annual report covering 2013.
Ecobank has a market share of 0.95 per cent. The bank recorded a loss of Sh890 million after tax last year which was an improvement from Sh1.1 billion loss the previous year.
Its deposits shrunk to Sh13.8 billion from Sh21.4 billion while its loan accounts decreased to 13,000 borrowers from 36,000 accounts.
The parent company, which is ranked among the largest banks in Africa by The Banker, pumped Sh2.2 billion in the lender with an extra Sh6.6 billion planned for the subsidiary.
Kenya, however, still has 15 medium sized banks after Guaranty Trust Bank, formerly Fina Bank, was upgraded. The country has six large banks and 22 small ones.
Ecobank entered the local market by acquiring mortgage lender East Africa Building Society (EABS) in 2008. It reported profit in the first three years, driven by writing back debt previously written off as bad as it cleaned its loan book.
In 2011 the bank started being weighed down by expensive deposits as it sought to grow its deposit base during a high-interest rate regime.
The bank has been offloading expensive deposits which have seen its customer savings shrink. Small banks normally pay a premium to attract deposits as they are perceived riskier.
“Depositors are likely to perceive small banks as more likely to fail than larger ones. Certainly the history of bank failures in Kenya is consistent with the assumption that large institutions are too big to fail,” said CBK in a recent report.
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