This marked a 5.8 percent decrease from Sh39.61 billion registered in the previous quarter that ended in June 2015.
The sector’s total income increased by 4.5 percent from Sh116.29 billion to Sh121.52 billion during the same period.
Total expenditure also increased by 9.8 percent from Sh76.68billion to Sh84.21billion.
“On an annual basis, the profitability of the sector increased by 9.3 percent from Sh104.5billion registered in September 2014 to Sh114.2billion in September 2015,” reads the report.
Interest on advances, other income and interest on government securities were the main sources of income. They accounted for 60.7 percent, 15.0 percent and 16.1 percent of total income respectively.
Additionally, interest on deposits, salaries, wages and other expenses were the major components of expenses, accounting for 35.8 percent, 25.7 percent and 21.9 percent of total expenses respectively.
Loans and advances grew 6.9 percent during the quarter under review. This was mainly driven by loans distributed to personal and household loans, trade, real estate and transport and communication respectively. However, with increasing use of mobile lending across the sector, loan size continued to shrink to Sh330, 655 versus Sh359, 672 in the previous quarter.
On the other hand, of the 12 Microfinance Banks (MFBs) in the country, loans and advances worth Sh46.1billion were granted as compared to Sh43.3billion as at the end of June 2015 translating to a growth of 6.5 percent.
However, the MFBs deposit base stood at Sh39.2billion during the period under review representing a decrease of 1.3percent from Sh39.7billion.
“The drop in deposit base was due to increased long-term borrowings from Sh8.1billion in June 2015 to Sh10.5billion in September 2015 signalling decreased reliance on deposits by MFBs as a source of funding customers’ loans.”
Commercial banks were on the other hand noted to have continued to contract retail entities to offer basic banking services on their behalf. These entities include security companies, courier services, pharmacies, supermarkets and post offices.
“These entities act as third party agents to provide cash-in-cash-out transactions and other services in compliance with the stipulated guidelines,” reads the report.
There were therefore 17 commercial banks that had contracted 39,871 agents who had facilitated over 193.4million cumulative transactions valued at Sh1.0trillion. However, the value of banking transactions undertaken through agents increased from Sh112.7billion to Sh116.2billion over the same period.
This is the quarter that saw Dubai Bank limited being placed under receivership and eventually on liquidation for failure to maintain adequate capital and liquidity ratios. Additionally, the bank was faulted of having non-performing loans and weak corporate governance structures.
Going forward, the Central Bank of Kenya predicts that the banking sector will remain stable and maintain an upward growth trend in the remainder of 2015.
“Credit and liquidity risks are expected to remain elevated to the end of the year 2015,” concludes the report.