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CBK downgrades banks sector rating on reduced capital

Patrick Njoroge
Central Bank of Kenya (CBK) governor Patrick Njoroge. FILE PHOTO | NMG  

The Central Bank of Kenya (CBK) has downgraded the 2017 banking sector rating from “strong” to “satisfactory” due to reduced capital and a drop in asset quality.

The regulator says in its supervision report covering the sector’s performance in the financial year ended December 2017 that only nine out of the 39 banks were rated as strong compared to 11 in the previous year.

“The banking sector was on overall rated satisfactory in 2017 as compared to a strong rating which was achieved in 2016. The decline in the industry’s overall rating was mainly due to a decline in capital adequacy and a deterioration in asset quality in 2017,” said the CBK.

This is the same rating that CBK governor Patrick Njoroge assigned the sector in 2015 as he marked his entry with the “new normal” mantra by halving the number of banks rated as strong from 22 to 11. This, he said then, was due to the general drop in asset quality, earnings levels and reduced liquidity positions of several banks.

The CBK rates banks as strong, satisfactory, fair, marginal or unsatisfactory. Last year, the nine strong banks commanded only 30.94 per cent of the market. The number of banks accorded a satisfactory market share remained 16, as was in 2016, with a market share of 57.84 per cent.


Twelve banks, with a market share of 8.37 per cent were ranked as fair, up from 11 in 2016. Those ranked as marginal grew from one to three, with a market share of 2.85 per cent.

During the year under review, the CBK disclosed that 15 banks were in violation of the Banking Act and the CBK Prudential Guidelines as compared to 12 in the previous year.

“The increase in the number of banks in violation was mainly in respect to non-compliance with the single borrower limit which was mainly on account of decline in core capital,” said the CBK.