Regional banks weather Covid storm

November 7, 2021

East African banks remained resilient with higher Return on Equity (ROE) for the 12 months to September 30 signalling a relatively healthy performance for the regional lenders with shareholders deriving value from their investments amid the Covid-19 pandemic.

Latest quarterly market report by analysts at AfricanFinancials Group shows that Kenyan banks dominated the list of regional lenders with higher ROE as eight lenders led by Equity Bank returned an average ROE of 14.37 percent during the period under review.

These lenders included Equity bank (18.3 percent), followed by KCB (17.9 percent), Absa Kenya (17.6 percent), Standard Chartered Bank Kenya (16.1 percent), I&M Bank (14.9 percent), Co-operative Bank (12.8 percent), Stanbic Kenya (11.9 percent) and NCBA (6.3 percent).

ROE is a measure of the financial performance of a company that is calculated by dividing its total net income by the shareholder equity.

According to the report titled The East Africa & Mauritius Top 30 Companies, Tanzania’s NMB and CRDB banks posted ROE’s of 20.6 percent and 17.7 percent respectively.

Uganda’s Stanbic Bank and Rwanda’s Bank of Kigali (BoK) had their ROEs at 21.8 percent and 17.4 percent respectively.

Mauritian MCB and SBM banks posted ROEs of 11 percent and 3.7 percent respectively

Last year, Kenyan banking sector registered a decline in performance with profit before tax decreasing by 29.5 percent to Ksh112.2 billion ($1.1 billion) from Ksh159.1 billion ($1.43 billion) in 2019 with the decrease in profitability attributed to a higher increase in expenses (Ksh77.47 billion, $697.92 million) compared with an increase in income (Ksh30.54 billion, $275.13 million), according to Central bank’s Bank Supervision Report (2020).

Lead position

In Tanzania, NMB and CRDB continued their twin dominance of the banking sector in 2021 third quarter results published last week, registering combined assets that surpassed the total assets of the next eight banks in the country by over Tsh4 trillion ($1.73 billion).

NMB once again edged ahead of CRDB to stay at the top in terms of both assets and customer deposits.

NMB reported assets of Tsh8.18 trillion ($3.55 billion) against CRDB’s Tsh8.13 trillion ($3.53 billion) and deposits of Tsh6.05 trillion ($2.62 billion) against Tsh5.89 trillion ($2.56 billion) for CRDB.

CRDB led in both Q1 (January-March) and Q2 (April-June) but while its assets portfolio grew by just 0.8 percent from Tsh8.06 trillion ($3.5 billion) over the three months (July to September), its deposits dropped 0.5 percent from Tsh6.06 trillion ($2.63 billion).

NMB meanwhile registered eight percent assets growth from Tsh7.6 trillion ($3.3 billion) and 5 percent deposits growth from Tsh5.84 trillion ($2.53 billion). Nevertheless, despite issuing loans worth over Tsh9 trillion ($3.9 billion) combined as of Q3 (July-September) 2021, both banks managed to keep their non-performing loan ratios below the Bank of Tanzania’s five percent benchmark as smaller banks continued to struggle with bad loans.

Far behind them on the assets scale are Standard Chartered Bank (Tsh2.4 trillion, $1.04 billion), National Bank of Commerce or NBC (Tsh2.1 trillion, $911 million) and Stanbic Bank (Tsh1.9 trillion, $835 million).


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