How Major Banks in Kenya Performed in 2023 Full-Year Results

Last week, I&M Group, DTB Group, Equity Group, and NCBA Group reported their FY 2023 results, closing the FY 2023 bank earnings season.

Standard Chartered Bank Kenya led in payout ratios at 80.1% with DTB Group recording the lowest payout ratio at 24.4%. KCB Group was the only bank that did not pay a dividend.

Loan Book Trends

KCB Group’s loan book was the largest across the major listed lenders, standing at KES 1.1T, representing 31.1% year-on-year growth. Stanbic Holdings recorded the highest growth relative to FY 2022 at 33.5% to KES 356.2B, which was equivalent to 77.6% of the asset base, as compared to 66.7% in FY 2022. The Co-operative Bank of Kenya’s loan book grew the least across the banks at 10.3% to KES 374.2B, which accounted for 55.76% of the loan book [FY 2022: 55.90%].

Government Securities Holdings

KCB Group recorded the largest jump in its stock of government securities, up 34.45% to KES 397.2B, followed by Equity Group, whose stock rose by 27.05% to reach KES 500.5B. NCBA recorded the lowest growth at 4.81% to KES 239.8B, while Absa, StanChart, and Stanbic reduced their holdings by 28.72%, 34.18%, and 45.72% to KES 95.22B, KES 69.6B, and KES 45.3B, respectively.

Except for Equity, whose government securities as a share of the asset base grew from 27.23% in FY 2022 to 27.48% in FY 2023, all other banks recorded a decline in the proportion of government securities to total assets, led by StanChart from 27.72% to 16.22%, followed by Stanbic from 20.9% to 9.87% and Absa from 27.97% to 18.31%.

Interest Income

The growth in interest income from loans and advances was more robust as compared to that from government securities, partly on account of increased lending in the period vis-a-vis investments in government securities, and higher lending rates in the year that contributed to more income from lending facilities. Particularly, Stanbic Holdings recorded the highest growth in interest income from loans and advances at 51.26% to KES 29.4B, followed by KCB Group and Absa Bank Kenya at 44.50% and 44.23% to KES 44.3B and KES 18.1B, respectively. Co-op Bank recorded the lowest growth at 11.01% to KES 44.9B.

Also Read: Equity Group Sees its Net Profit Down 5% to Ksh.43.7 Billion

While the growth in interest income from government securities was relatively lower as compared to growth in interest income from loans, KCB Group and DTB Group recorded 29.90% and 29.15% growth rates to KES 42.7B and KES 24.1B, respectively. Strikingly, banks with foreign parent ownership, notably Stanbic, Absa, and StanChart, witnessed declines in interest from government securities at 2.41%, 2.57%, and 19.72% to KES 5.1B, KES 9.2B, and KES 8.3B, respectively.

Non-Interest Income

All banks recorded growth in non-interest income, with the exception of NCBA Group recorded growth in non-interest income. DTB Group recorded the highest growth at 34.3% to KES 12.2B, driven by 2.3X growth in other income to KES 1.1B, and modest growth in fees, commissions, and FX Trading Income. NCBA saw its non-interest income decline by 3.9% to KES 9.1B on account of a 33% drop in FX Trading Income. That also marked the largest drop in FX Trading income across the banks and other banks that recorded declines include KCB at 2.1% and Absa at 2.0%. Co-op Bank recorded the highest growth in FX Trading Income at 63.0% to KES 12.3B, which ultimately played a greater role in the Non-Funded Income (NFI) mix, contributing nearly half at 46.3% as compared to 29.2% in FY 2022.

Interest Expenses

The cost of customer deposits and funding in general remained elevated in FY 2023 on account of higher interest rates in the macroeconomic environment. With rising yields in short-term papers, it became more attractive for investors to place cash in those investments – and the general impact of this was an increase in funding costs across the board. Across the banks, KCB Group recorded the highest change in interest expenses as compared to FY 2022 at 95.64% to KES 60.8B, followed by Stanbic Holdings at 71.67% to KES 12.4B, and third was Absa Bank Kenya at 66.55% to KES 14.2B. StanChart Kenya was the only bank that recorded a decline in its interest expenses at 6.86% to reach KES 3B.

Loan Loss Provisions

There was a general trend in banks provisioning more in FY 2023 relative to FY 2022, and all banks recorded growth in provisions except NCBA Group and Co-op Bank. KCB recorded the highest change at 154.68%, StanChart at 154.43%, and Equity at 128.71%. NCBA and Co-op Bank reduced provisions by 29.91% and 30.76% to KES 9.2B and KES 3.4B, respectively.  Equity Group closed the year with the largest absolute size of loan loss provisions at KES 35.3B, up a whopping 128.7% to represent 26.99% of operating expenses [FY 2022: 11.80%].

Non-Performing Loans: Equity Group posted the highest change in gross Non-Performing Loans (NPLs) at 81.51% to KES 114.6B. StanChart was the only bank that recorded a decline in gross NPLs, down by 23.72% to reach KES 17.2B. KCB’s stock of gross NPLs crossed the KES 200B mark to reach KES 208.3B – the largest across the industry, representing a growth of 29.2% from FY 2022. While the ratio of gross NPLs to loans might have reduced by 30 basis points (bps) for KCB, this is a result of loan book expansion given that the absolute change from 2022 stands at KES 47.1B. Regarding the share of gross NPLs to the loan book, Stanbic had the lowest share at 7.4% while KCB had the largest share at 19.0%.

Profitability: The two largest banks in Kenya by asset base, notably KCB Group and Equity Group were the only banks that recorded a decline in net profit at 8.3% and 5.1% to KES 37.5B and KES 43.7B, respectively. Outside of these two banks, NCBA recorded the highest growth in net profit, up 55.7% to surpass the KES 20B mark to reach KES 21.5B, followed by Stanbic Holdings at 34.2% to KES 12.2B, and Co-op bank recorded the lowest positive change at 5.2% to KES 23.2B. Worth noting is that DTB Group was the only lender that closed the year with Sub-KES 10B in net income at KES 6.9B, which was 5.4% lower than the KES 7.3B recorded in FY 2019.

Compiled By Mwango Capital

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Lawrence Baraza

Lawrence Baraza is a dynamic journalist currently overseeing content at Metropol TV Digital. With a keen focus on business news and analytics, Lawrence guides the platform in delivering insightful, data-driven content that empowers its audience to make informed decisions. Lawrence’s commitment to quality and his ability to anticipate market trends make him a key figure in the digital media landscape. His work continues to shape the way business news is consumed, making a significant impact in the field.

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