Markets & Finance

Equity, Co-op banks feature on global list of top lenders

equity

Equity Bank ranked at position 900 on the basis of shareholders investment, referred to as tier one or core capital, while Co-op was at position 1,000. FILE

Co-operative Bank has joined Equity in the list of top 1,000 lenders in the world by capitalisation as ranked by The Banker, a Financial Times magazine that focus on the global banking industry.

Co-op Bank ranked at position 1,000 on the basis of shareholders investment, referred to as tier one or core capital, while Equity was only a rung higher at position 999.

“Kenya is the top African market for return on assets, at more than five per cent, and enjoys a new entrant in the ranking – the Cooperative Bank of Kenya entering at 1,000,” said authors of the report.

Equity Bank has core capital of Sh29.5 billion while Co-op bank had Sh29.4 billion. KCB has the largest shareholder capital in the country at Sh42.1 billion.
We could, however, not verify its ranking on the list. Equity Bank was ranked fourth in asset utilisation and 12th in capital efficiency.

“Out of Sh261 billion, 80 per cent is being sweated to provide income. Sixty two per cent of our deposits are long term which means we can match the investment cycle of our customers. That is our greatest strength,” said Equity Bank’s chief executive James Mwangi during the release of the lender’s results for the first half of the year.

The high returns on capital deployed have seen Kenyan banking industry attract foreign investors, as the banks continually post impressive profits.

Two weeks ago, Nigeria’s largest lender Guaranty Bank bought 70 per cent of Fina Bank while earlier in the year French private fund, Amethis Finance invested Sh900 million into Chase Bank, which is classified as a medium-sized lender.

A consortium of private funds had also showed interest of buying into Equatorial Commercial Bank before the deal fell out with a former managing director attributing it to interference from the board.

London-based PE fund, Helios EB Investors which acquired a 24.9 per cent stake in Equity Bank at Sh11 billion in 2007 has also made a U-turn over a pledge to reduce its stake after its investment grew three fold in the short period.

The banking counters are also some of the most active in the Nairobi Securities Exchange as investors jostle for a piece of the profit pie.

High interest charges for loans issued from deposits mobilised at low cost by the banks have enabled Kenyan banks to report the high performance. Audit firm RSM Ashvir has in the past reported that Kenya banks had the widest interest spread in Africa.

Equity and Co-op bank are retail banks that have aggressively adopted the use of agents to increase their reach.

In the global ranking, Chinese banks were dominant, taking four of the top 10 positions. Chinese lender ICBC displaced Bank of America as the largest lender globally in terms of capital and profitability.

The banker said they used tier one capital to measure the strength of the banks and rank them as it was more transparent and consistent. Asset size was ruled out as there is no way to ascertain the quality of the assets and profits can be volatile.