More than half of the listed financial institutions struggled to reach profitability as core earnings per share (EPS) declined, according to a new report.
EPS is the portion of a company’s profit credited to each of the firm’s listed share. It is usually a marker of overall profitability registered by the listed firm.
National Bank of Kenya (NBK), Standard Chartered, Housing Finance Group, CFC Stanbic, NIC and Barclays Bank of Kenya are six of the 11 listed companies whose core earnings were negative, according to the Cytonn Investments’ Banking Sector Report for year 2015. Cytonn surveyed 11 listed commercial banks.
I&M Bank, Co-operative Bank, KCB, and Equity Bank posted positive growth with I&M Bank scoring the highest EPS growth at 26.2 per cent.
The average EPS growth for the whole banking sector was 2.8 per cent.
In the financial year 2015, loan growth exceeded deposit growth with a number of banks contending with a surge in non-performing loans. Generally, a restrictive macro-economic environment meant that lenders struggled to mobilise deposits and borrowers to furnish their loans.
The report which also ranked the performance of the banks for the year under review placed the embattled NBK at the tail-end of the log following the bank’s poor financial run, which saw the mid-tier lender register a loss of Sh1.2 billion.
NBK, which has since sent its CEO and five other senior managers on compulsory leave, also scored the lowest on governance.
Housing Finance Group continued its poor run taking the second last position, although it moved up one place in the ranking.
KCB moved up two places to unseat Equity Bank at the top.
The report attributed KCB’s improved performance to robust franchise value-financial results it reported in the review period as well having the best corporate governance rating among the listed banks.
However, the most improved lender was I&M Bank which moved up three places to sit at position four as the lender upped its operating efficiency and had efficient distribution channels.
Co-operative Bank and CFC Stanbic took the fifth and sixth positions respectively.
Barclays Bank of Kenya was another poor performer, dropping four places from position three in the previous ranking.
The lender, which has been rocked by claims that Barclays Plc would be withdrawing its stake from Barclays Bank of Africa, suffered low deposits per branch and reduced efficiency.
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The report predicted a tough future for foreign banks. “These banks (foreign banks) have not been willing to adapt African dynamics,” said Shiv Arora, the head of equity at Cytonn.
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