Category Archives: Bank rankings

5 Kenyan banking stories of 2022 and 2023

2022 in Review 

1. Credit reference shake-up: A failure of banks to carry out proper credit education and to convey the benefits of good repayment to customers, through lower interest rates, caught up with them. This was combined with a tendency to blacklist defaulters at the earliest instance to punish them – and became an issue at political campaigns ahead of the August 2022 election.

The new government set in motion a plan to clear over 4 million borrowers from credit reference bureau blacklists This was in part a 50% waiver on their debt and a window of six months for borrowers to pay the balance of the amount. At the Absa Q3 results briefing, management of the bank explained that there would be no immediate impact as these were loans of people who got stuck in 2020 (during the Covid-19 disruption) that had already been fully provided for

2. CEO suite changes: At Absa Bank Kenya, MD Jeremy Awori left after nine years. He later joined Ecobank Transnational Incorporated, the parent of the Ecobank Group, as the Group CEO replacing Ade Ayeyemi, who retired after attaining the age of 60. Absa Kenya then picked its Chief Financial Officer Yusuf Omari to take over as interim CEO  as  Moses Muthui was made the interim CFO. 

At KCB Joshua Oigara left after nine years and later in the year joined the Standard Bank group as the CEO of Stanbic Kenya and South Sudan, after Charles Mudiwa retired after two decades. KCB appointed Paul Russo, who was MD of their National Bank subsidiary as the new KCB Group Chief Executive Officer. Following that, KCB now has Anastacia Kimtai as the acting KCB Kenya MD and Peter Kioko as the acting MD of National Bank of Kenya

At the I&M Group, the CEO of I&M Bank Kenya Kihara Maina moved on to be the group’s regional CEO, taking over from Chris Low, and the new Kenya MD is Gul Khan who joined from Airtel Money Africa. 

Cooperative and Diamond Trust and Equity banks still retain their long-serving leadership though, at Equity, Polycarp Igathe stepped down as Chief Commercial Officer to contest for the Nairobi Governor seat in the August 2022 elections. edit And from Mwango Capital, we learn of more leadership changes at banks with Sam Muturi joining as Consolidated Bank’s new CEO and Anuj Mediratta as CEO of Gulf African Bank with Helen Chepkwony as the acting CEO of the Kenya Deposit Insurance Corporation (KDIC). Also, Shelter Afrique had another executive change with Thierno-Habib Hann stepping in as the new MD/CEO, replacing Kingsley Muwowo, the CFO, who had been the interim boss. Another change saw Rose Kagucia become the Acting CEO/Managing Director at Dubai Islamic Bank, replacing Peter Makau.

3. Capital raising and arranged marriages: Banks set out to raise new capital in different ways. Larger banks with foreign links like Absa can attract Tier II funding at low rates (of about 3%) which is lower than the cost of deposits or the bond markets (about 9%). Smaller banks arranged sales like Spire to Equity and Sidian to Access while deposit-taking microfinance banks found fintech partners. Key Microfinance is now LOLC Kenya, UMBA, a Delaware fintech bought 66% of Daraja Microfinance Bank, Century Microfinance became Branch Microfinance Bank and Uwezo Microfinance is now Salaam Microfinance Bank. 

4. Green finance is in: Banks report on it and the Kenya Bankers Association published sustainable finance guidelines and principles for banks to align their processes and products (including loans) and the Central Bank has guidelines on climate risk management. Banks are now attracting “green finance” and touting their green credentials joining new green alliances and measuring their activities such as tree planting and reducing their carbon footprints. 

5. Resurgence of the bank branch” Co-Op, Diamond Trust, Family, and NCBA bucked the branch closure trend to show that digital growth needs a physical presence to support it. 

Outlook for 2023

1. Go Big in Ethiopia: Following Safaricom’s big entry into Ethiopia, will banks now follow into the next big African market African after DRC that has delivered big for Equity? Kenyan bank support new partners of the telco that can lead to other businesses in the country that need to unlock financing – and take on the local giant Commercial Bank of Ethiopia (27th largest in Africa), which is not growing its assets now with currency restrictions and a prolonged war. The entry path for foreign banks is now set and KCB, Equity and Stanbic are among the dozen foreign bank that have had representative offices in the country for a few years.

2. Will digital bank customers stick around? January 1 sees a return of several bank charges that were waived in March 2020 at the start of the Covid-19 wave to enable bank customers to make digital and contactless payments. Many tried out digital services offered by their banks for the first time as they were now free of charge. Non-funded income is key for bank profits, but it will be seen how the return of bank and mobile payments/transfer charges will be received by customers are different banks. In this economy, customers are more cost-conscious than ever, especially with the government tax on every bank transaction going up to 20% in 2023.  

3. New savings and investment products that target diaspora, retail and unbanked customers. While lending to the “hustler” economy is well-documented, digital wealth creation and preservation products are still lagging.

Ahead of the much-anticipated IPO’s to come to the Nairobi Securities Exchange, EFG Hermes has invested in a platform for retail investors and this week Acorn got approval for Vuka, a platform for retail investors to into REIT’s.

4. African banks get serious about Nairobi: Access (17th largest in Africa) Ecobank (18) and UBA (25) have all had relatively small footprints in Kenya but now have a chance to grow. Across Africa, there are changes in the banking hierarchy with the largest bank group by asset size for decades, Standard Bank of South Africa with a sluggish home economy about to be passed by the National Bank of Egypt 166 billion, as Egypt Bank Misr has also passed SA’s Absa group to be number six on the continent. You can also expect a resurgence in West Africa, into East, perhaps by buying more banks, as Access is with its second bank deal (for Sidian) to leap up the Kenya asset ranks which are led by Equity (37th in Africa) and KCB (40). edit. However, in January 2023, Centum Investments cancelled the agreement to sell its 83.4% stake in Sidian Bank to Access Bank.

5. The year is expected to usher in a new regime at the Central Bank of Kenya with a new Governor, Deputy (2 positions) and Chairman by June 2023. The current cabinet Secretary of the National Treasury (i.e. the Finance Minister) is himself a former CBK governor. 

Kenya’s Top Banks in 2022

Spire (38th in assets), the smallest bank in the country, had been up for sale, and Mwalimu Sacco announced that they would not be putting in any more capital in the Kshs 3.5 billion asset bank to bury a bad investment made in 2015, but still faces resistance from some stakeholders. Equity Group (2) agreed to buy Spire‘s assets in September 2022.

Access, the largest bank group in West Africa, bought Transnational, the 33rd largest bank in Kenya in 2019 and renamed it. Then in June 2022, Access announced that they would take over Sidian Bank (20) with Kshs 43 billion of assets, by buying a majority stake from Centum for Kshs 4.3 billion. 

President William Ruto announced at the Nairobi Securities Exchange in October that Credit Bank (27) along with Bio Foods were on a path to floating their shares at the NSE. He encouraged the private sector to join the new government in working to revitalise the NSE and promised 5 to 10 public listings – and where Development Bank (29) may also feature. 

First Community Bank (26) overcame a mini-run in October and assured panicked depositors that their funds were safe.

Top 10, by assets in June 2022.

10. Bank of Kigali, which is cross-listed in Nairobi. 

9. I&M.

8. Stanbic Bank

7. Diamond Trust

6. Standard Chartered

5. Absa Bank Kenya.

4. NCBA briefly edged ahead of Co-op for 3rd in the assets race this year.

3. Co-operative Bank

2. Equity Bank have a slight edge in group assets over KCB Group (both at Kshs 1.26 trillion) after buying two banks in DRC.

1. KCB Kshs 887 billion assets and Kshs 23.8 billion profit as of June 2022 and then bought into DRC before the end of the year. 

$1 = Kshs 118 in June 2022.

Absa Kenya to pay an interim dividend for 2022

Absa Bank Kenya continued to show strong growth in a complex environment of macroeconomic challenges and high inflation. At the announcement of financial results for the first half of 2022 in Nairobi, Managing Director Jeremy Awori said the institution has transformed into a financial services giant with new offers in bank assurance, wealth management, risk management, research, and asset finance. These are all built around being a digital-first entity with products like Timiza which added 4 million accounts, leading to a five-fold growth in the number of customers they serve.

In the first half of the year, Absa Kenya had its fastest revenue growth in a decade with income growing by 17% to Kshs 20.9 billion and they recorded a pre-tax profit of Kshs 9.1 billion, a 15% increase. Loans were up 19% to Kshs 262 billion and deposits up 7% to Kshs 282 billion, and Absa Kenya assets are now Kshs 445 billion.

Absa Kenya’s Chief Strategy Officer Moses Muthui said that revenue was now growing faster than their peers in the banking industry and their strategy will be to stay relevant to customers by growing opportunities that offer sustainable and inclusive growth. Absa’s cost-to-income ratio is 42%, against a five-year target of 45% and this allows the bank to invest in areas to innovate for customers. As part of their next five-year strategic plan, starting from 2023, they will grow into other new businesses like asset management and consumer payments businesses such as diaspora remittance. They will re-enter the custody business that Barclays exited a decade ago to serve international clients as well expand their investment banking services across East Africa.

To give returns to investors and enhance shareholder value, Absa Bank Kenya will pay a Kshs 0.20 per share dividend, amounting to Kshs 1.09 billion, one of the few institutions that will pay an interim dividend. Already shareholders of the Nairobi-listed bank have one of the highest returns on equity at 23% and dividend yields.

Absa Kenya resumes dividends after record FY2021

Banking seems to have gotten over the shocks of the last two years, going by the outlook of Absa Bank Kenya. The bank released its 2021 financial results in Nairobi today and signalled a recovery with a resumption of dividend payouts similar to pre-Covid times.

The bank recorded assets of Kshs 429 billion and pre-tax profit of Kshs 15.6 billion for 2021, up from Kshs 5.6 billion in the previous year. Its deposits of Kshs 269 billion and loans of Kshs 234 billion had grown by 6% and 12% respectively. Absa Kenya will pay a dividend of Kshs 1.1 per share to its shareholders, equivalent to a sum of Kshs 6 billion or 58% of its profits. This comes after a dividend freeze last year in which the bank had rescheduled 30% of its loan book to accommodate its customers whose business and lives had been affected by the Covid-19 trade disruptions.

Absa Kenya Managing Director, Jeremy Awori said that 95% of the rescheduled borrowers had since resumed making loan repayments and the bank was able to lend another Kshs 128 billion in 2021.

The bank grew income by 7% to Kshs 37 billion and impairments decreased by 48% to Kshs 4.7 billion. The results were booked without the weighty exceptional items as it has completed the separation, rebranding and transition exercise from Barclays Kenya to Absa Kenya.

Chief Financial Officer, Yusuf Omari said the bank had strong capital and liquidity ratios and was in a good position for 2022 and onwards. He added that the capital position is stronger than in pre-Covid times, and the bank’s bad debt ratio is now at 7.8% compared to the Kenya banking sector average of 13%.

Awori said that the country’s GDP was on the rebound and services, notably tourism, were expected to recover with the removal of travel and quarantine restrictions that had kept business people, tourists and other nationals from visiting the country. There was however caution given the ongoing conflict in Ukraine following the invasion by Russia and which is expected to drive up food and fuel prices across the globe.

Chief Strategy Officer, Moses Muthui said that the last five years had been about growing revenue, driving transformation and bringing down costs. He added that with the separation done, Absa could focus on further diversifying its retail products, growing business banking, and building a regional powerhouse in corporate and institutional banking.

Bank of the Year Awards 2021

The Banker magazine is announcing its “Bank of the Year” awards for 2021 today. The awards are grouped by different zones of winners for the Americas, Europe, Middle East & Africa, Asia and overall global.

For Africa, the winners for best bank in different countries were: Algeria (Citi), Angola (Banco BAI), Botswana (FNB), Cabo Verde (Banco Interatlântico), Comoros (Exim Bank), Democratic Republic of Congo (Trust Merchant Bank), Djibouti (CAC International), Egypt (Banque Misr) and Guinea Bissau (Orabank).

Kenya’s bank of the year was KCB, then Mauritius had SBM, Morocco (Bank of Africa), Mozambique (Millennium BIM), Namibia (Windhoek), South Africa (Nedbank), and Sudan (Omdurman National).

Multiple award winners include Ecobank (best in Equatorial Guinea, Gambia, Togo), Equity Bank (for Rwanda, South Sudan, Uganda) and Stanbic (for Ghana, Tanzania, Zimbabwe)

Finally, the United Bank of Africa (UBA) won best bank in thirteen countries across the continent – Benin, Burkina Faso, Cameroon, Chad, Congo, Cote d’Ivoire, Gabon, Guinea, Liberia, Nigeria, Senegal, Sierra Leone and Zambia. The UBA Group also won the overall “bank of the year 2021” for the Africa region.