New Central Bank of Kenya (CBK) data shows the lenders’ total expenditure on staff salaries increased by 20 per cent to Sh90.3 billion in the three years ended 2017.
Banks had a total of 36,923 employees in 2014, the highest in the history of Kenya’s banking sector, but the number has dropped to 30,903, marking three consecutive years of job reductions in an attempt to save costs.
Kenyan commercial banks’ wage bill has risen by Sh15 billion even as the lenders sacked 6,020 employees in the past three years, raising queries on the effectiveness of their cost-cutting strategies.
New Central Bank of Kenya (CBK) data shows the lenders’ total expenditure on staff salaries increased by 20 per cent to Sh90.3 billion in the three years ended 2017.
Banks had a total of 36,923 employees in 2014, the highest in the history of Kenya’s banking sector, but the number has dropped to 30,903, marking three consecutive years of job reductions in an attempt to save costs.
Salaries and wages paid by the lenders have, however, risen sharply over the three years, according to the CBK data.
Costs for the financial year ended December 31, 2017, rose by 6.5 per cent or Sh5.5 billion to Sh90.3 billion despite the sector trimming its staff size by 2,792 in the same year.
The lenders attribute this increase to rising staff salaries.
“Salaries and wages as a ratio of income increased to 18.6 per cent in 2017 from 16.9 per cent in 2017. This reflects enhanced salaries and wages in the sector given that overall staff levels decreased,” said the CBK report.
Salaries-income ratios
The 2017 salaries and wages as a ratio of income is the worst since 2013 when it was at 19 per cent.
At 18.6 per cent, it means that for every Sh100,000 that a bank generates as income, Sh18,600 goes to paying salaries and wages, up from Sh16,900 a year before.
This casts doubts on the now common practice by banks to trim workforce in order to cut costs and improve on efficiency.
With the increase in workload, workers in the banking sector have bargained for improved terms, complicating the management’s model of growing by shrinking the workforce.
While in 2016 one employee was serving an average of 1,222 customers, this ratio has increased to 1,544 customers by last year as banks continued to turn away from branch model to alternative channels of delivery such as agency and mobile banking.
In 2014 one employee was serving about 770 customers. This means that when compared to 2017, the number of customers served by a bank employee has more than doubled, putting pressure on their work.
Million deposit holders
According to CBK data, in 1996 when the country had only one million deposit account holders, the sector had only 16,673 workers. Each was serving about 60 customers.
Last year saw banks such as KCB, Equity, Barclays Bank of Kenya,#ticker:BBK Standard Chartered Bank of Kenya,#ticker:SCBK National Bank of Kenya, #ticker:NBK First Community Bank and Sidian Bank record a drop in headcounts.
But as at half year ended June 2017, financial results show that costs may not come down as anticipated.
KCB, #ticker:KCB whose workforce dropped by 709 in 2017 partly due to early retirement schemes that target to save Sh2 billion per year, had only seen Sh485 million drop in the staff costs.
Equity, #ticker:EQTY whose workforce dropped by 318, has seen a Sh1.3 billion rise in staff costs in six months of 2018 compared to a similar period last year.
Co-operative Bank, #ticker:COOP with a workforce reduction of 58 last year, saw 2018 half year staff costs jump by Sh615 million while that of Barclays went up by Sh19.3 million despite reducing the staff size by 323 in 2017.
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