Commercial Bank of Africa, the sixth largest bank by market share, yesterday posted the second largest growth in profitability among the seven top-tier lenders in the first half of the year.
Standard Chartered had the biggest growth of 34.79 per cent to Sh5.23 billion.
CBA, owned by President Uhuru Kenyatta's family, said net earnings rose 27.42 per cent to Sh2.37 billion compared to Sh1.86 billion in the same period in 2015.
The lender's profit was largely boosted by a 38.91 per cent jump in net interest income to Sh7.14 billion, despite a flat loan book, with advances declining 0.36 per cent to Sh106.92 billion.
Deposits during the period grew 13.20 per cent to Sh163.12 billion, CBA – the only tier-one lender not listed on the Nairobi Securities Exchange – said in a financial statement yesterday.
The country's seven large banks, which controlled 58.21 per cent of the market in December 2015, made a Sh42.83 billion total net profit in January-June period, a 13.64 per cent growth over the Sh37.69 billion a year earlier.
Barclays Bank was the only lender which experienced a slowdown, with net profit declining 10.11 per cent to Sh4.09 billion, it reported on Friday.
The country's largest lender KCB retained its top spot, posting a 14.62 per cent growth in net earnings to Sh10.5 billion.
Equity's 18.01 per cent rise in net profit kept it rooted on the second position with Sh10.11 billion – a rise of 18.01 per cent.
Co-operative Bank, the country's second largest lender by assets, was third in profitability at Sh7.41 billion, which is an 18.75 per cent growth year-on-year.
Barclays and Diamond Trust Bank – which joined the elite group last year benefiting from Imperial Bank's fall – followed with profits of Sh4.09 billion and Sh3.62 billion, respectively.
The higher profit recorded by the industry relative to other industries was one of the major thrusts for the passing and signing of the Banking (Amendment) Act. The amended law puts a 400-basis point ceiling on bank interest rates above the base rate set by the Central Bank, presumed to be the 10.5 per cent Central Bank Rate. The law also requires banks to pay a minimum of 70 per cent of the base rate on term deposits.
Banks have, however, defended their earnings arguing they are justified as they trickle down into the economy.
“It is the profits that lead to banks being one of the biggest taxpayers in the Kenyan economy, with approximately Sh69 billion in taxes every year,” Kenya Bankers Association chairman and chief executive of Standard Chartered Lamin Manjang said on August 10. “In fact last year, when the banking industry faced some challenges with some banks being closed, and others reporting lower profits, the impact on Kenya Revenue Authority tax collections was felt immediately.”
The impact on the stocks of the 11 lenders trading on the NSE was immediate with some of them having lost as much as 10 per cent – the daily limit – on their stocks.