July 17, 2024

Exploring the H1 2023 Financial Insights of Kenyan Banks

All the major Kenyan banks have recently unveiled their financial performance for the first half of 2023. These reports provide valuable insights into the banks’ profitability, asset quality, and overall performance during this period. 

Investors and stakeholders can now assess the banks’ strengths and weaknesses, making informed decisions based on these H1 results.

As per the Central Bank of Kenya (CBK) reports for March 2023, the Kenyan banking sector displayed robust growth in key financial indicators. 

Profit before taxes surged by 14% to Ksh 128.2 billion, signaling increased profitability. Total assets expanded by 11% to Ksh 6.77 trillion, reflecting the sector’s growing scale. Gross loans witnessed a significant 14% increase, reaching Ksh 3.85 trillion, indicating an uptick in lending activities. 

Customer deposits grew by 8% to Ksh 4.5 trillion, showcasing strong public trust in banks. Shareholder funds increased by 6% to Ksh 964 billion, reinforcing the sector’s financial stability and capital strength.

Stanbic bank kenya emerged as the fastest-growing bank in the first quarter of 2023. Notably, this marks the final year of their current strategic plan, and it is the first year under the leadership of Joshua Oigara as their Chief Executive. The bank’s impressive growth signals a promising start to this new era.

Stanbic Bank Kenya, absa bank kenya, ncba group, and standard chartered bank (Kenya) exhibited remarkable profit growth, with respective increases of 84%, 51%, 49%, and 45%. These banks, known for their distinguished personalized financial services, are growing at an accelerated pace. Their focus on tailored offerings appears to be a driving force behind their success.

Equity Bank Limited led the pack in terms of absolute profits after taxes, achieving an 8% growth, reaching Ksh 12.8 billion at the group level. This impressive performance placed equity bank Ksh 3 billion ahead of the second-ranking banking group in terms of profitability.

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KCB Bank Group retained its position as the largest bank by asset base, boasting Ksh 1.6 trillion in assets as well as shareholder funds. Its size and stability underline its significance in the Kenyan banking sector.

Standard chartered bank (Kenya), ncba group, absa bank kenya, and i&m bank ltd stand out for their well-curated asset management and wealth products tailored for retail customers. This is evident from their assets under management for consumer products, signifying their commitment to providing comprehensive financial services.

The banking sector faced challenges as interest expenses, the costs banks incur on deposits, outpaced interest income from loans. This imbalance affected the profitability of selected banks, highlighting the need for effective interest rate management and income diversification.

There was a noticeable spike in non-performing loans across the listed banks, with the exception of ncba group. The increase in non-performing loans can pose risks to the financial stability of banks and underscores the importance of prudent lending practices.

Equity Bank Limited’s regional subsidiaries contributed significantly to its performance. These subsidiaries generated Ksh 6.2 billion in net profits in H1 2023, constituting 47% of the group’s profit after taxes. Additionally, ncba group achieved profitability in Tanzania, while TMB (KCB’s DRC Unit) played a pivotal role in contributing to its profits from regional subsidiaries.

The Bancassurance units of coop bank and kcb bank reported pretax profits of Ksh 336 million and Ksh 284 million, respectively. Equity Group also contributed to this segment with a total of Ksh 320 million in pretax profits from its two insurance businesses. This highlights the growing importance of bancassurance as a revenue source for Kenyan banks.

There has been a noticeable shift in innovation within the Kenyan banking sector. Innovation has transitioned from a focus on financial inclusion and digital channels to emphasize financial empowerment and outcomes for customers. 

Distinguished offerings, relationship management, and customer value management have become pivotal strategies for success in this evolving landscape. This shift reflects the changing dynamics of customer expectations and competitive positioning in the industry.

Data for this H1 report analysis was sourced from Abojani Investment Ltd, a prominent financial and investment advisory firm