Banks on course for double-digit profit growth

Commercial banks are on course to post another full-year of double-digit growth in profits, according to a review of their performance in the 10 months ended October 2019.

Fresh data from the Central Bank of Kenya (CBK) shows that the banking sector’s pre-tax earnings for the 10 months stood at Sh140.7 billion.

This represents a 10.3 percent increase compared to the pre-tax profit of Sh127.6 billion made a year earlier.

The industry is expected to maintain the double-digit growth in the full-year ended last month, with the last quarter expected to bring in some additional earnings boost from the removal of the lending controls.

The profit levels confirm that banks had fully recovered from the interest rate cap law that was introduced in September 2016, knocking down the sector’s 10-month gross earnings by 12.8 percent to Sh113.6 billion in 2017.

The performance beats the expectations of many analysts who projected a slowed growth on account of expected higher loan loss provisioning due to a new accounting standard.

Genghis Capital, an investment bank, had projected the provisions for eight top banks, including KCB, Equity and Co-operative Bank to jump by 52.9 percent and weigh down their earnings.

Unaudited results declared by the banking industry up to September placed the lenders’ net profit at Sh83.9 billion compared to Sh77 billion in a similar period in 2018. This translates to a rise of nine percent.

The gain was mainly as a result of fast-growing non-interest income, which jumped 17 percent to Sh108.08 billion compared to interest income that grew at two percent to Sh263.4 billion.

Gross loans for the banking sector closed October at Sh2.82 trillion with liquidity hitting a high of 51.2 percent.

The liquidity level is more than twice the CBK’s threshold of 20 percent required of every lender.