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Irony of expanding bank outlets amid massive layoffs

By Otiato Guguyu | Published Tue, April 17th 2018 at 10:53, Updated April 17th 2018 at 10:55 GMT +3
Investment Analyst at Cytonn Investments Caleb Mugendi briefs journalists during the release of the Cytonn 2017 Banking Sector Report in Nairobi April 16, 2018. [Elvis Ogina, Standard]

In summary

  • Banks have taken advantage of the rate cap to sack employees
  • New report shows lenders continue to open new outlets despite wave of restructuring that has seen close to 1,620 staff sent home

About 93 new bank branches were opened last year despite massive layoffs, migration to mobile-based technology and a shift to agency models, a new survey shows.

According to the Cytonn Investments 2017 Banking Sector Report, this year alone, National Bank has opened two new branches in Nandi Hills and in Kitale as it targets the expanding agribusiness sector.

NIC Bank, on the other hand, has opened four new branches in Malindi, Watamu, Kilifi and Diani.

The report, released yesterday, says following 39 branch closures, more than 1,620 bank employees lost jobs last year in the financial institutions’ effort to contain costs while taking advantage of disruptions by the interest rate cap.

“With rising operating expenses in the sector and the expected reduced margins owing to the enactment of the Banking (Amendment) Act, 2015, 11 banks announced plans to downsize. Close to 1,620 bank employees were laid off and 39 branches closed, but the total number of branches in the sector rose to 1,182 in the financial year 2017 from 1,089 in the financial year 2016,” said Cytonn.

The investment firm’s numbers were modest as it could not establish how many workers left some of the lenders.

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Cytonn said, for instance, that the number of struggling Family Bank’s employees who left remains unspecified. The lender let go of 100 staff in December 2016 and a further 150 in December 2017.

Banks had 28,009 employees on their books as at August 2016, but the wave of layoffs left 26,076 employees as at June 2017.

According to the banking sector lobby - Kenya Bankers Association (KBA) - its members cut 1,933 jobs between August 2016 and the end of June this year due to the reality of the rate cap.

According to Cytonn, Equity Bank lost the highest number of staff, 400, followed by Barclays Bank of Kenya at 301 and Standard Chartered at 300.

The country’s biggest lender by assets, Kenya Commercial Bank (KCB), laid off 223 employees, while Commercial Bank of Africa closed the most branches at 12.

Banks took advantage of the rate cap law to declare a crisis and opted to send workers home to manage costs.

The layoffs have, however, come at a cost, including severance packages for early staff retirement.

“We expect to see a short-term spike in cost to income ratios as result of managements’ tough decisions on staff rationalisation, branch closures and investments in technology. Going forward, these actions will trim the excess fat, making banks leaner and more efficient to face the future,” said Standard Investment Bank.

Most employees have now been replaced by agents and mobile banking channels.

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