Banks have been under pressure to improve on their operating efficiency in the era of control on cost of loans.
The lenders have been shedding staff while shifting their customers to digital and mobile banking channels for most of their services.
Kenyan commercial banks’ staff payrolls increased by Sh1 billion last year, edging closer to hitting an all-time high of Sh100 billion.
Full-year financials for the lenders show bank employees earned a total of Sh99.13 billion in 2018, indicating stiff competition for talent and the effects of wage inflation in the industry.
Pay data for 37 out of the 40 operational commercial banks shows that the majority – 23 - reported an increase in their wage bills while 17 reported a decrease.
Jamii Bora Bank and First Community Bank are yet to make public their full-year financials for 2018.
Banks have been under pressure to improve on their operating efficiency in the era of control on cost of loans.
The lenders have been shedding staff while shifting their customers to digital and mobile banking channels for most of their services.
The shift to digital banking coupled with lending to the Treasury, helped the 37 lenders to report a 12.5 percent or Sh12.7 billion increase in net earnings to Sh113.7 billion in 2018.
Staff redundancies
While some lenders, including KCB #ticker:KCB and Equity Bank,#ticker:EQTY relied on staff redundancies and natural attrition to cut their wage bills, others such as NIC Bank saw their wages go up due to expansion.
NIC Group chief executive officer John Gachora said that the bank opened eight new branches last year, raising staff numbers and also wages.
The lender’s wage bill went up by Sh431 million or 14 percent to Sh3.6 billion in 2018.
“Each bank will have its own story. For most banks, it is direct inflation-linked wage increases, even though there were some which had a reduction in their cost,” said Mr Gachora.
Banks that cut their wage bills last year leaned on the shift to digital platforms and staff cuts.
Equity Bank chief executive James Mwangi said during the lender’s full-year performance briefing last week that the banked had achieve a Sh20 million cut in the wage bill to Sh11.46 billion by pushing customers to alternative banking channels. This meant the lender did not need to replace staff quitting employment.
“While last year we had a 15 percent average increase in monthly salaries, the effect (on the total wage bill) was muted by the fact that there is no replacement of exiting staff since customers are opting to serve themselves using our alternative digital channels as we move away from the brick and mortar branches,” said Mr Mwangi.
Wage bill
KCB shrank its wage bill by Sh2.1 billion to Sh17 billion by partly cutting staff numbers by 263 to 6,220. However, KCB’s still the highest payroll in the industry.
Although the lender did not disclose reasons for the latest drop in its employee numbers, it was a contributing factor in its 21.8 percent jump in net profit to Sh24 billion for the year.
Mr Gachora said it was unlikely that banks would have matched the rate of job cuts seen in previous years.
Lenders in 2015 contracted their staff numbers for the first time in 14 years by 711 to 36,212, before making further cuts in 2016 to 33,695 in 2016 and 30,903 in 2017.
Employment trends are usually a good indicator of the health of an industry, given that companies hire or fire based on projections of financial performance.
The general rise in wages, combined with the double-digit profit growth, is bound to raise questions about banks’ assertion that they continue to suffer negative effects of the interest rates cap.
The lenders last month scored a victory when the High Court declared the regulations capping loan rates unconstitutional, giving the National Assembly a year to amend the law.
Bank owners are also enjoying higher dividend payouts, at an annual growth rate that is higher than the return of 9.4 percent they would get for investing in the one-year Treasury bills.
Total dividend payout
Shareholders of tier one lenders will see their total dividend payout go up by 13.5 percent to Sh35.5 billion, their financials show.
Their customers on the other hand are still struggling to get loans.
Private sector credit grew at just 3.4 percent in the year to February, according to the latest data from the Central Bank of Kenya.
The lenders have instead turned to government lending to grow their income, increasing their interest income from these securities by 14 percent to Sh126 billion.
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