KCB staff bonus rises three-fold to Sh1.8 billion

Kenya Commercial Bank employees saw their bonus pay rise three-fold to Sh1.86 billion last year helped by the lenders performance in 2011.

The bank on Wednesday disclosed in its 2012 Annual report that it paid its employees Sh1.865 billion in bonuses in the year to December compared to Sh667 million a year earlier.

Nearly 87 per cent of the performance pay was paid to its Kenyan operations, with employees of the regional subsidiaries sharing Sh252 million.

The payout come as the bank reported a 53.5 per cent growth in profit to Sh10.1 billion, becoming the most profitable lender in a year that it increase dividends pay by 48 per cent.

Analysts reckon that the employees were unlikely to have received a similar payout — which was equivalent to nearly three months’ salary on average — this year when profits grew 11.9 per cent to Sh12.2 billion.

“The bonus pay this year was less compared to last years since it recorded its slowest growth since 2007,” said an analyst at Kestrel Capital.

The bonus pay at Sh1.86 billion was equivalent to 24.7 per cent of the Sh7.5 billion KCB paid in wages in 2011, a pointer that the lender’s average performers received up to three months’ salary in performance-based compensation, with star performers receiving more.

KCB’s net profit stood at Sh10.9 billion in 2011 compared to Equity Bank (10.3 billion), Barclays Bank (Sh8 billion) and Cooperative Bank (Sh5.3 billion).

The quest to reward managers and a push by the bankers’ workers union has seen bankers salaries rise by double-digit over the past two years.
Analysts link the rise in executive pay to the sector’s increased profitability and need to reward and retain top talent.

“The double-digit rise among banks’ executives’ pay is being driven by a high demand for their talent as competition in the industry heats up,” David Muturi, the executive director of the Kenya Institute of Management told the Business Daily in an earlier interview.

For instance, KCB executive directors saw their pay rise 22.8 per cent last year to Sh86.7 million, according to the annual report.

(Read: Top KCB executives opt for early retirement)

In the new economy, banks are developing good business ideas that are being copied with speed, forcing employers to constantly be on the lookout for innovators.

This type of thinking is making human capital the most sought after resource in the production system and an arsenal for companies that seek to grow. In top demand are people who are technologically literate, globally astute and capable of not only developing but also executing strategy.

As a result, the top banks are keen to retain star talent and this is forcing employers to increase fixed salaries and widen the scope of performance-related compensation to include bonuses and shares.

This comes as the lenders continue to seek fresh road maps to reduce their wage bills and freeze hiring to protect profits.

StanChart’s staff cost increased 25.1 per cent to Sh4.55 billion last year while KCB’s direct costs rose 9.7 per cent to Sh8.2 billion despite reducing employee count to 5, 162 from 5, 571 the previous year.

Kenyan banks’ heavy investment in IT in the last two years — whose benefits began to show from the second half of 2010 — has reduced the need for paper work and backroom offices due the automation of branches, which has rendered a number of workers redundant.

As a result, top banks such as Barclays and KCB have shed jobs while others like Equity have frozen hiring.

Bankers have said they are betting on agency banking and technology-based delivery channels such as ATMs, mobile and internet banking to cut back on new hiring as this will serve more customers away from banking halls.

This is expected to reduce the role of lower cadre employees such as supervisors, clerical officers and secretaries, who have seen their pay rise by an average of 21 per cent over the past two year, thanks to negotiations by the Bankers Insurance Finance Union.