Six of the 10 listed local lenders cut their cost to income ratio in the nine months to September compared to the corresponding period in 2020.
Standard Chartered Kenya recorded the biggest fall in its cost to income ratio, dropping to 48 percent from 55 percent.
Listed banks have become more efficient this year, cutting their cost to income ratios on a rebound in profits amid sustained efforts to cut expenses through measures such as closure of branches and staff layoffs.
Six of the 10 listed local lenders cut their cost to income ratio in the nine months to September compared to the corresponding period in 2020, meaning they were effectively spending less to generate every shilling of income.
Standard Chartered Kenya #ticker:SCBK recorded the biggest fall in its cost to income ratio, dropping to 48 percent from 55 percent, while mortgage lenders had the biggest jump from 111.4 percent to 119.5 percent, analysis by Dyer & Blair Investment Bank shows.
“Most listed banks recorded a year-on-year improvement in cost to income ratios supported by slower growth in operating expenses as compared to operating income…this is as a consequence of a recovery in the top-line occurring at a time when most banks were focused on minimising their operating expenses following the onset of the pandemic,” said Dyer & Blair.
On average, the cost to income ratio of the listed lenders fell to 54.07 percent from 55.1 percent last year.
Lenders have recorded higher profits this year on the back of the relaxation of Covid prevention measures with the listed lenders raising their collective net earnings by 78 percent to Sh100.2 billion in the nine-month period.
Dyer & Blair expects the ratio to continue narrowing going forward as profit growth outpaces that of expenses, with lenders shifting to digital channels, which are more efficient from a cost perspective.
“Given the expected growth in top-line anchored by the improving macro-economic environment, we expect a faster growth in operating income against operating expenses thereby exerting downward pressure on cost to income ratios across the sector,” said the investment bank.
It, however, added exceptions should be made for banks such as I&M that is investing in additional technology and NCBA #ticker:NCBA , which is expanding branches.
