CBK forecasts strong performance by banks

By John Oyuke

Central Bank of Kenya (CBK) expects the banking sector to regain growth momentum this year citing the recovering economy as the driving force.

The bank said the financial services sector is also expected to gain from new opportunities from the integration of East African Community (EAC) economies.

CBK Governor Njuguna Ndung’u said the EAC Common Market Protocol coming into effect in July would help expansion of Kenyan banks into the region.

"Banks are expected to source for additional capital tapped from these regional opportunities," he said.

He said locally, competition is expected to intensify as banks downstream, while well-established Pan African and international banking brands consolidate their presence in Kenya.

"These market dynamics could see a move towards mergers and strategic alliances,’’ said Ndung’u.

Prof Ndung’u made the remarks while releasing the Bank Supervision Annual Report for 2009.

He said the banking sector demonstrated its resilience to show commendable performance in last year despite difficult trading period.

According to the supervision report, the sector’s asset base increased by 14 per cent, up from Sh1.18 trillion in December 2008 to Sh1.35 trillion in December last year.

Pre-tax profits

The sector also registered an increase in pre-tax profit to reflect a 13 per cent growth.

Banks’ earnings during the 2009 financial year stood at Sh48.9 billion.

Ndung’u noted that the performance was registered in the midst of global financial crisis, severe drought and power outages.

He said a crippling drought and power rationing in the second-half of the year dampened the growth prospects for the Kenyan economy, but even so banks went ahead to post good earnings.

CBK attributed the resilient performance of the economy to the enabling legal and regulatory environment in place and the robust risk management framework adopted by commercial banks.

The report also highlights other notable developments in the legal and regulatory framework last year.

These include the operationalisation of banking — Credit Reference Bureau (CRB) — regulations, enactment of the Proceeds of Crime and Money Laundering Act and the introduction of agent banking through the Finance Act of 2009.

The CRB regulations, it says, will help the creation of information capital for more Kenyans to access affordable credit.

Equally, the Anti-Money Laundering Act, the report indicates, will reduce the vulnerability of Kenya’s financial sector to potential abuse.