There have been a number of significant developments in the financial sector in Kenya in the first two months of 2022, and our Media TEAM took time to assemble some of these key happenings in the industry, for your benefit and enrichment.

The Financial sector shaken as Russia invades Ukraine

March was the critical month during which Kenyan banks declared eye-watering profits and record dividend payout to shareholders during their annual financial reports for the year ended December 31, 2021.

After a period of reduction in net earnings, mass layoffs and freezing of dividends in 2020, Kenyan lenders have suddenly bounced back amid modest growth in revenues and reduction in operating expenses.

All of the major banks have published their financial performance figures for the 12 months to December 31, posting on average over 80 percent growth in net profit.

These are Absa Bank Kenya which recorded the highest jump in net profit by 161 percent, followed by Equity Bank (99 percent), KCB (74 percent), Standard Chartered Bank Kenya (66 percent), Co-operative bank (53 percent) and Stanbic Holdings Ltd (39 percent).

Our Media team assembled the events that occurred in the second half of March, and hereby present them to you, our reader for your reference. Enjoy the read.

Equity Group Net Profit Rises 99% to KSh40.1 Billion in 2021

According to the Kenyan Wallstreet, Equity Group Holdings posted a Profit After Tax (PAT) of KSh40.1 Billion from KSh20.1 Billion in 2020, an increase of 99%.
According to the Equity Group’s audited financial statements and other disclosures for the year ended 31st December 2021, this performance now ranks Equity Group as the most profitable lender in Kenya in 2021.

Shareholders will be significantly rewarded after directors of the bank declared a 50% increase in dividend payouts to KSh11.8 billion. This is the first time Equity is rewarding its shareholders since the last dividend payout of 2018. The dividend is at the rate of KSh3 per share.
The lender’s Pre-Tax Profit increased significantly to KSh51.9 billion in 2021 from KSh20.9 billion in 2020.

The Group’s Balance Sheet size grew from KSh1.015 trillion in 2020 to KSh1.305 trillion in 2021, a growth of 29% growth. Equity Group’s profitability, as measured by Earnings per Share (EPS), grew 98% to KSh10.40 in 2021 from KSh5.20 in 2020.

Net loans to customers rose from KSh 477.8 billion to KSh 587.8 billion at the end of 2021.
Subject to Shareholders’ Approval, Equity Group will pay the declared dividend to its shareholders on or before June 3oth June 2022 to members on the register on or before the closure date of 20th May 2022.

KCB Records historic 74 per cent rise in profit after tax

KCB Group Plc recorded a historic 74% rise in profit after tax for the full year ending December 2021, riding on economic recovery across markets. 
Net profit grew to KSh34.2 billion compared to KSh19.6 billion a year earlier, on the back of increased income, cost management and lower credit provisions which saw the Group post higher returns to shareholders.
Key Financial Highlights of the KCB results included the following;

  • Profit after Tax – Up 74% to KShs.34.2 billion compared to KShs.19.6 billion.
  • Revenue – Increased 13.5% to KShs.108.6 billion on account of increase in interest income driven by increase in earning assets, non-funded income, and lower cost of funding.
  • Costs – Up by 11.9% to KShs.47.8 billion.
  • Total Assets – Increased 15.4% to KShs.1.139 trillion.
  • Customer Loans – Increased by 13.5% to KShs.675.5 billion through organic and strategic acquisitions.
  • Customer Deposits — increased 9.1% to KShs.837.1 billion due to organic growth mainly in the Kenyan market.

Stanchart's full-year net earnings up 67 per cent in 2021

Standard Chartered Bank Kenya’s net earnings for the year ended December 31, 2021, grew 67 per cent as the economy recovered from the Covid-19 pandemic. 

According to the financial results released in March, the lender reported a profit after tax of Sh9 billion compared to Sh5.4 billion in the previous financial year.

“Income returned to growth after the dip last year occasioned by the impact of the pandemic, increasing seven per cent with strong underlying business momentum,” Standard Chartered Bank, Kenya CEO Kariuki Ngari said in a statement published by the Star Newspaper.

The board has recommended the payment of a final dividend of SH14 for every ordinary share of Sh5. An interim dividend of Sh5 was declared and paid in December 2021.

This will bring the total dividend for the year to Sh19 per ordinary share, which is 81 per cent higher than that the 2020 pay out.

NCBA Group Net Profit Doubled to KSh10.2 Billion in 2021

NCBA Group Plc more than doubled its net earnings for the financial year ended 31st December 2021 to KSh10.2 Billion from KSh4.6 Billion posted over a similar period in 2020, an increase of 121.7%.

The lender, established in 2019 following the merger of NIC Group Plc and Commercial Bank of Africa Limited (CBA), saw its Profit before Tax (PBT) rise significantly from KSh4.98 Billion in 2020 to KSh15.0 Billion in 2021.

NCBA Group, which has subsidiaries in Rwanda, Tanzania, Uganda and Ivory Coast, is also in partnership with Safaricom to provide M-Shwari and MPesa Fuliza.

The lender’s digital loan disbursements went up to KSh584 Billion in 2021 from KSh434 Billion in 2020, while the lender’s Total Operating Income increased to KSh49 Billion in 2021 from KSh46 Billion in 2020. Total Operating Expenses declined to KSh33.4 Billion in 2021 from KSh40 Billion in 2020.

According to the audited financial results of NCBA Group for 2021, the lender’s balance sheet size grew to KSh591 Billion in 2021 from KSh528 Billion in 2020, while Customer Deposits were up to KSh470 Billion from KSh422 Billion in 2020.

Absa Bank records a Ksh10.9 Billion Profit after Tax

Absa Bank Kenya customers will receive dividends after a break in 2020 due to the effects of the Covid-19 pandemic on the business.

The lender maintained its proposed dividend per share at Sh1.1 same as 2019. The board has recommended a dividend pay-out of Sh6 billion for 2021.

The lender recorded a Sh10.9 billion Profit After Tax for the year ended December 31, 2021, a 161 percent growth from Sh4.2 billion in 2020.

How CBK intervention affected Banks’ performance

The increased provisioning by Kenyan lenders during the Covid-19 period was also compounded by the Central Bank which provided flexibility to banks with regard to requirements for loan classification and provisioning for loans that were performing on March 2, 2020 and whose repayment period was extended or were restructured due to the pandemic.

The one-year window through which the lenders had extended and restructured the loan repayments for customers adversely impacted by the pandemic expired on March 2, 2021 and the borrowers were given three months to regularize their loan repayments.

According to CBK, loans amounting to Ksh1.7 trillion ($14.91 billion) were restructured during the period from March 3, 2020 to February 2021, accounting for 57 percent of the banking sector’s gross loans. In 2019, Kenyan banks started implementing the IFRS 9 which requires them to set aside greater provisions for expected credit losses.

Under the IFRS9, which replaced the International Accounting Standard (IAS) 39, banks are expected to provide for projected loan losses rather than those already incurred, thereby reducing their profitability and eroding their capital base.

Data from the Central Bank of Kenya shows that last year (2021), Kenyan banks conservatively sat on excessive liquidity and reduced lending to key sectors of the economy to reduce exposure on loan defaults and loan loss provisions to remain profitable.

According to the central bank’s monthly statistical bulletin, banks increased lending by only 2.25 percent ($121.92 million) to Ksh631.1 billion ($5.53 billion) in 2021 from Ksh617.2 billion ($5.41 billion) in 2020.

The banks also reduced lending to agriculture and real estate by Ksh11.9 billion ($104.38 million) and Ksh30.1 billion ($264.03 million) respectively.

Also hard hit was the building and construction and private household sectors whose loans were reduced by Ksh1.7 billion ($14.91 million) and Ksh2 billion ($17.54 million) respectively.

Banks also reduced lending to the finance and insurance sector by Ksh800 million ($7.01 million) and consumer durables by Ksh900 million ($7.89 million). Total bank lending to the government also declined slightly by five percent ($171.05 million) to Ksh380.3 billion ($3.33 billion) in 2021 from Ksh399.8 billion($3.5 billion) in 2020, according to Central Bank data.

Reduction in lending reduces loan loss provisioning as per the IFRS 9 requirements.