According to Central Bank of Kenya(CBK) latest statistics, total income stood at Sh104.0 billion in the second quarter being an increase of 9.4 percent from Sh95.05 billion in the first quarter of 2014 while total expenses increased by 8.3 percent from Sh61.46 billion in March 2014 quarter to Sh66.56 billion in June 2014 quarter.
Interest on loans and advances, fees and commissions and government securities were the major sources of income accounting for 58.5 percent, 19.4 percent and 15.1 percent of total income respectively while interest on deposits, staff costs and other expenses were the main components of expenses, accounting for 32.7 percent, 28.4 percent and 24.3 percent respectively.
Net assets grew by 5.3 percent from Sh2.82 trillion in March 2014 to Sh2.97 trillion in June 2014 while the sector’s gross loans and advances increased from Sh1.69 trillion in March 2014 to Sh1.78 trillion in June 2014 representing a 5.3 percent growth.
Deposits were the main source of funding for the banking sector, accounting for 72.3 percent of total funding liabilities with the deposit base growing by 5.4 percent from Sh2.04 trillion in March 2014 to Sh2.15 trillion shillings in June 2014 supported by branch expansion, remittances, receipts from exports and increased use of alternative delivery channels of banking services such as agency banking model.
The number of bank deposit accounts increased from 23.8 million in March 2014 to 25.3 million in June 2014 representing a growth of 1.5 million accounts or 6.3 percent.
“The banking sector registered improved capital levels in June 2014 with total capital increasing by 2.3 percent from Sh426.6 billion in March 2014 to Sh436.6 billion in June 2014, whereas shareholders’ funds increased by 1.3 percent from Sh453.6 billion in March 2014 to Sh459.4 billion in June 2014. However, the ratios of core and total capital to total risk-weighted assets decreased from 15.7 percent and 18.2 percent to 15.0 percent and 17.5 percent respectively,” the CBK reported stated.
CBK attributed the decline in capital adequacy ratios to higher increase in total risk weighted assets than the increase in capital base during the period under review.
The value of gross non-performing loans (NPLs) increased by 6.9 percent from Sh95.1 billion in March 2014 to Sh101.7 billion in June 2014.
During the period under review, eight out of 11 sectors registered increase in NPLs owing to the spill-over effects of high lending interest rates and challenges in the business environment.
The number of banking transactions undertaken through agents increased from 11.8 million registered in the quarter ending March 2014 to 13.5 million transactions registered in the quarter ending June 2014 while the value of banking transactions undertaken through agents increased from Sh67.0 billion to Sh72.5 billion over the same period.
“The adoption of agency banking model is expected to facilitate commercial banks to reach the under-banked and unbanked Kenyan public,” CBK stated.
CBK says the banking sector is expected to sustain its growth mainly supported by the branch expansion, regional integration initiatives, advances in information and communications technology and the adoption of the devolved governance system in Kenya.
The bankers set 9.13 percent as the new Kenya Banks Reference Rate aimed at bringing down the cost of borrowing.
The industry has also implemented the adoption of the Annual Percentage Rate (APR) pricing mechanism for loans where banks will now begin disclosing to loan applicants the components that makeup the total cost of credit as a percentage known as Annual Percentage Rate.