The number of lenders the Central Bank of Kenya (CBK) rated as ‘strong’ doubled to six in 2021, accounting for a market share of 38.19 percent from 3.6 percent in the previous year.
The regulator uses qualities such as capital adequacy, assets, management quality and the strength of the earnings and the liquidity position of a bank in assessing its soundness.
The three-strong banks in 2020 had net assets amounting to Sh194.84 billion compared to the six in 2021 with Sh2.29 trillion in assets.
“The number of institutions rated strong, and fairly increased from three and nine in December 2020 to six and 11 in December 2021, respectively,” said the CBK.
The number of lenders rated as satisfactory dropped from 23 in 2020 to 19 last year — with their market share declining from 75.6 percent to 46.7 percent. Two lenders were cited as marginal while one was deemed unsatisfactory.
Overall, the CBK said the banking sector rated satisfactory in 2021 as was in 2020, mainly due to continued recovery from the Covid-19 pandemic.
The CBK in flagged nine banks for non-compliance with various rules compared with 13 in 2020, largely due to failure by owners to raise fresh capital in a depressed economy battered by Covid-19 shocks. Some institutions had multiple offences.
In meeting capital adequacy ratios, the CBK said two lenders violated the requirement to maintain the minimum core capital required of Sh1 billion.
Five were flagged for failure to maintain the minimum statutory ratio for total capital to total risk-weighted assets of 14.5 percent, while four banks did not meet the minimum ratio of core capital to total risk-weighted assets of 10.5 percent.
Another three were in breach of the required core capital to deposit ratio of eight percent, although it was likely that it was the same lenders having multiple capital ratio defaults.
