Why large banks beat tier-two lenders in profitability race

The Central Bank of Kenya. PHOTO | DENNIS ONSONGO | NMG

Large banks are widening the profitability gap between them and their tier two and three counterparts, leveraging on their wider reach and cheaper cost of funds to extract a higher return on assets.

The tier-one lenders significantly extended the gap in earnings in 2021 as they made a better recovery from the Covid-19-led slowdown of 2020 compared to the other tiers, nearly doubling their gross earnings in the process.

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Note: The results are not exact but very close to the actual.