The Q1’2023 Banking Sector Report, just released by Cytonn Investment, highlighted that the banking sector continues to demonstrate sustained performance despite the tough operating environment occasioned by elevated inflationary pressures experienced during the period.
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The report, themed” Sustained Profitability Despite Challenging Business Environment”, analyzed the performance of the ten listed banks during the first quarter of the year 2023, with Equity Group being ranked as the most attractive bank in Kenya.
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According to the report, the banking sector continued to show sustained performance despite the challenging environment, with core earnings per share for the listed banks recording a weighted growth of 25.0% in Q1’2023, compared to a weighted growth of 37.9% recorded in Q1’2022.
Banks continue to implement their diversification strategies, with the non-funded income recording a significant growth of 48.1% in Q1 2023 compared to the 20.1% growth of the net interest income in a similar period last year.
However, the asset quality for banks deteriorated, with the non-performing loan (NPL) ratio increasing marginally by 0.1% points to 12.6% in Q1’2023 from 12.5% in Q1’2022. The NPL ratio shows the percentage of the gross loans that is unlikely to be paid back by the borrowers.
Despite the elevated credit risks, banks continued to be optimistic with their lending strategies, with net loans and advances to customers recording a weighted average growth of 19.6% in Q1’2023 compared to 17.2% in Q1’2023.
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Additionally, it was noted that Kenya continued to be overbanked, with the number of commercial banks in Kenya currently standing at 38, leading to a ratio of 6.6 banks per 10 million population, which is significantly higher compared to other African major economies like South Africa and Nigeria, whose ratios are 5.5x and 1.1x, respectively.
