Banks continue to post super performance

By Andrew Watila

The growth is attributed to increase in lending to households, trade, manufacturing and real estate sectors

Commercial banks began the year with strong performance as interest rates maintained a downward trend. The banking sector registered a 15.1per cent growth in pre-tax profits, from Sh8.7 billion in January 2012 to Sh10 billion as at end of January 2013, according to official data from the Central Bank of Kenya (CBK).

The annual return on assets also rose from four per cent in January 2012 to 4.1 per cent in January 2013. However, return on equity declined from 34.9 per cent to 32.4 per cent over the same period. This is on account of  an increase in equity compared with the increase in profit according to the CBK Monthly Economic Review.

Total expenses

Total income increased by 1.9 per cent from Sh28.5 billion in January 2012 to Sh29.1 billion in January 2013.

Total expenses decreased by 3.9 per cent from Sh19.8 billion in January 2012 to Sh19 billion in January 2013, with the decrease being largely attributed to decline in interest expenses on deposits.

 The report indicated that loans, deposits and assets of the banks are growing significantly. “The banking sector gross loans and advances increased from Sh2.05 trillion in January 2012 to Sh1.38 trillion in January, which translated to a growth of 14.8 per cent,” said CBK in its report.

The growth was attributed to increase in lending to households, trade, manufacturing and real estate sectors. “Loans and advances net of provisions stood at Sh1.2 trillion in January 2013, up from Sh1.38 trillion registered in previous period,” added the report.

 Interest rates on loans stood at 17. 8 per cent in February, down from 18.1 per cent in January and 18.2 in December last year.

 Growth in assets

 This is on account of falling CBK benchmark rate, which currently stands at 9.5 per cent.

The economic analysis noted that the growth in assets of the financial institutions in the period ending January was driven by increase in deposits.

“During the year to January 31, the banking sector registered improved growth in assets driven by growth in deposits and retention of profits,” added the report. Banks balance sheet during the period, according to CBK, rose by 15.7 per cent.