Equity Bank maintained its position at the top in the latest bank rankings report by an investment firm, while Diamond Trust Bank (DTB) moved up six places to occupy the second position.
The report by Cytonn Investments, which analysed and ranked all 11 listed banks in the country placed KCB at position three, with Barclays Bank of Kenya coming in fourth. Standard Chartered, Co-op Bank, I&M, NIC, CFC Stanbic followed in descending order.
The last two positions were held by National Bank of Kenya and Housing Finance, respectively.
Cytonn’s Q3 banking report showed that Equity Bank’s stronghold remain unshaken due to its robust franchise value backed by high return on average equity of 29.2 per cent, high net interest margin of 10.2 per cent and a high non-interest income contribution to revenue of 39.6 per cent.
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Moreover, the lender’s recent acquisition of Congo’s Pro-Credit and the roll-out of thin-sim card Equitel was also expected to boost growth in the near term, according to the report.
Diamond Trust Bank which together with KCB was recently chosen by the Kenya Deposit Insurance Corporation (KDIC) to serve depositors of the collapsed Imperial Bank Limited (IBL) up to a maximum of Sh1 million made the greatest improvement in the quarter under review.
DTB’s growth was boosted by its high growth rate to 18.4 per cent buoyed by its regional expansion strategy and increased focus on more efficient channels of distribution such as agency banking. The bank also had a high quality loan books and risk management, which boosted its franchise value, according to the report.
Mortgage financier Housing Finance has failed to move up from the bottom in the three consecutive reports.
HF remained stuck at the bottom of the grid for the third time running owing to poor profitability and poor liquidity.
Interestingly, CFC Stanbic, which topped the ranking in Q1 has never recovered. Instead the South-African-linked lender has remained stagnant at position nine. In the period under review the bank recorded one of the least earnings.
“The analysis was brought about by a need to be able to recommend to our investors, which banks are the most stable from a franchise value and from a future growth opportunity perspective,” said Maurice Oduor, an investment manager at Cytonn.
According to the report, going to the future, the banks’ net interest margins are expected to remain depressed, and the only way for the banks to drive revenue is by diversification to increase their non-funded income.