NAIROBI, Kenya Apr 15 – The banking sector has spent over Sh5 billion in the last three years in staff restructuring programs as the financial sector seeks to cut down staff costs and improve efficiency.
During the period over 900 people lost their jobs in the restructuring process.
Standard Investment Bank Research Analyst Faith Waitherero says several banks in Kenya have reviewed their human resource needs with a view of controlling rising costs and improving efficiency.
“Staff costs are the main cost element in banks accounting for more than 50 percent of operating costs and hence the first target in a cost-saving containment drive. With this in mind, a reduced staff cost element will result in a reduced Cost-To-Income ratio which will in turn positively impact the bank’s profitability,” Waitherero said in an Interview with Capital Business.
National Bank of Kenya (NBK) and Co-operative Bank (Co-op) had the highest cost to Income ratios in the industry at 75.3 percent and 59 percent respectively in 2013 against an industry average of 47.4 percent. In 2014, NBK cost to Income ratios came down to 70.2 percent while Co-op Bank maintained at 59 percent. as benefits are expected to be felt in 2015.
In 2014, National Bank of Kenya(NBK) laid off 190 staff through a voluntary retirement programme at a cost of Sh1 billion as the company seeks to lower costs and increase efficiency.
Co-op Bank’s retrenchment process in 2014, which cost the bank Sh1.34 billion, contributed to a drop in net profit by 12 percent.
The bank posted a net profit of Sh8 billion compared to Sh9.1 billion in the previous year attributable to a one-off retrenchment where a total of 160 management staff were retired from the bank.
“Kenya Commercial Bank (KCB) is currently reaping the fruits of its transformation programme carried out between 2011 and 2013 which saw its costs to income ratio move from a high of 62.8 percent in 2010 to a low of 56.2 percent in 2013,” Waitherero added.
KCB scrapped 15 director-level positions as well as laying off 120 staff at a cost of Sh1.2 billion.
In the past three years, Barclays Bank of Kenya (BBK) has reduced its staff by about 420 at a cost of Sh1.7 billion as it sought to trim its cost-to-income ratio.
Waitherero says staff costs and investments in technology will remain the Key cost drivers in the banking sector going forward.
“With most large banks having downsized their staff numbers, we see adoption of technology and use of alternative channels as well as leveraging on high staff productivity as the next phase of the cost containment drive,” she said.