Banks fear political bickering may slow industry’s growth

By James Anyanzwa

The banking industry has expressed huge concern over the rising political temperatures in the country.

Kenya Bankers Association (KBA) says the industry’s profitability could be affected if the current political trend persists.

"It will depend on the political environment. If we continue with our politics then banks will record modest growth," Mr John Wanyela, the association’s executive director told Financial Journal.

Uncertainty is slowly building in investment circles in the wake of disagreements amongst the Grand Coalition partners over the Draft Constitution and the fight against corruption.

"The biggest impediment is obviously the political noise. Squabbling is scaring away donors and other foreign investors. We want an enabling environment for the business to thrive," said Wanyela.

Standard Chartered Bank of Kenya (SCBK) controlled costs and raised total income to post a 43 per cent rise in pre-tax profit last year, the highest growth rate yet to be reported by the country’s banks.

Loan book

Ranked third by assets, the bank’s boost in profitability year was helped by a 31 per cent rise in its loan book and only a three per cent rise in costs.

Mr Richard Etemesi the bank’s chief executive, however, said this year had started well, but political uncertainty and the high cost of fuel continued to put a brake on economic growth.

Co-operative Bank Managing Director Gideon Muriuki when releasing the bank’s results. Squabbles in the political front are sending negative signals to the banking industry.

"We have started the year with a blend of caution and confidence," Etemesi said early this month, adding, "The return of private sector confidence, which is essential, rests on development in the political arena as well as government efforts to stimulate the economy."

The bank’s profit before tax (PBT) last year rose to Sh 6.7 billion, while total income climbed 22 per cent to Sh12.4 billion.

The Barclays Bank recorded a 12.5 per cent growth in pre-tax profit for the full-year ended December 31. The bank’s PBT increased to Sh9 billion from Sh8 billion in the previous year.

Mr Adan Mohamed, Barclays regional managing director for East and West Africa, attributed the strong financial performance to gains realised from business expansion between 2007 and 2008, sound credit risk management, better margin management and strong focus on enhancing the bank’s product and service offering.

Financial statements

"We continued to grow our profits last year, despite economic pressures both locally and in the global markets," said Adan.

Last week the Co-operative Bank announced an 11.2 per cent growth in pre-tax profit over the same period. The bank’s profit before tax (PBT) climbed to Sh3.74 billion from the previous year’s Sh3.36 billion.

According to the bank’s audited financial statements, total customer deposits grew by 39 per cent to Sh91.6 billion from Sh65.9 billion prompted by a 71 per cent growth in clientele base to 1.2 million accountholders.

The bank’s total asset portfolio swelled by 33 per cent to Sh110.7 billion from Sh83.5 billion.

Operating environment

The loan book advanced by 18 per cent to Sh62.3 billion from Sh52.9 billion, mainly supported by the bank’s diversified product lines and a competitive pricing regime.

Mr Gideon Muriuki, the bank’s managing director termed the performance as ‘satisfactory’ in view of the difficult operating environment.

"This is a commendable growth particularly in a challenging economic environment and the global down turn experienced in 2009," said Mr Muriuki.

Muriuki attributed the remarkable performance to prudent risk management, cost rationalization, sustained investment in human capital and expanded income streams from new business opportunities.

He said the bank diversified its revenue streams by investing in home-loan facilities, points of sale, stockbrokerage and coffee marketing initiatives.

During the period under review, the group’s net interest income rose 19 per cent to Sh6.8 billion from Sh5.7 billion while the non-funded income jumped 24 per cent to Sh4.95 billion from Sh4 billion mainly from fees and commissions.

The National bank of Kenya reported a 20 per cent rise in pre-tax profit while Kenya Commercial Bank and Equity bank each registered a five per cent growth in PBT.

The NIC bank’s profits however grew merely by three per cent last year.

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