Kenya Banks register 26pc profit rise to Sh90bn.

 

Banks

 

Local commercial banks booked Sh90 billion in pre-tax profits in the year ending October 2012 despite high interest rates that slowed down credit growth in the economy.

 

The latest Central Bank of Kenya (CBK) Monthly Economic Review show that commercial bank’s profits rose 26.8 per cent to Sh90 billion in the one year period ending October 2012, compared with Sh71 billion in a similar period in 2011.

 

Total income increased by 46.7 per cent to Sh295.6 billion in October 2012, up from Sh201.5 billion in October 2011.

Total expenses rose by 57.6 per cent to Sh205.6 billion in October 2012 from Sh130.5 billion in the review period in 2011, with the increase largely attributed to interest on deposits.

“During the period ended October 2012, the Kenyan banking sector registered improved growth in assets, driven by growth in deposits, injection of capital and retention of profits. The sector registered improved performance in earnings and capital and the level of non-performing loans reduced, compared with a similar period in 2011,” CBK data showed.

Private sector credit growth increased by Sh83.2 billion in the year to October 2012, a slowdown due to the high interest rate regime, compared with Sh304.5 billion recorded in previous year.

“Most activities of the private sector recorded reduced credit supply in the year to October 2012, compared with a corresponding period in 2011, save for finance and insurance,” CBK said.

Total credit share

Real estate accounted for 35.5 per cent (Sh29.5 billion) of the total share of credit in the period under review, while building and construction accounted for 18.8 per cent (Sh15.7 billion).

Private households accounted for 10.8 per cent (Sh9 billion); finance and insurance, 7.4 per cent (Sh6.2 billion); manufacturing, 6.8 per cent (Sh5.6 billion); while trade accounted for 6.6 per cent (Sh5.5 billion).

Analysts expect the Monetary Policy Committee’s move to cut the benchmark rate to 9.5 per cent from 11 per cent in its meeting last Thursday to lead to a reduction in lending rates, resulting in an upsurge in credit.

“Actions of the MPC to cut the CBR to 9.5 per cent signal the Central Bank’s intention to stimulate growth by offering cheaper credit.

“This will drive investors to take positions in anticipation of strong growth,” analysts at Afrika Investment Bank said.

Last year, a high interest rate environment in the first half saw six companies issue profit warnings as finance costs clawed into their margins.

Meanwhile, the big commercial banks continued to register impressive growth in profitability despite the high lending rates that have dampened borrowing appetite.

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