Banks in Kenya heavily relied on non-funded income (NFI) to drive profit, as evident in the quarter three results. Between January and September, Kenya’s five biggest banks recorded a net profit of Ksh 59.9b, mostly relying on NFI.
The Cooperative bank recorded the highest growth in NFI, posting a 33% surge. In second place came KCB, whose NFIs grew by 16.9%. Equity and Barclays grew their non-funded sources by 13.7% and 4%, respectively. However, Standard Chartered saw a drop of NFIs pegged at – 1.12%.
The increase in NFI for the three quarters was as a result of an increase in charges and commissions. For instance, KCB’s Joshua Oigara alluded to the bank’s NFI increase to the growth of KCB-Mpesa, which earlier increased its monthly interest charges. Additionally, analysts argue that Equity’s NFI growth stems from a 21% increase in other fees and the growth of its forex trading income.
The rate cap law reduced income from loans, forcing banks to diversify their revenue streams.
Since parliament scrapped off the interest ceiling, banks will now benefit from growing revenues from NFIs supplementing interest income. The removal of the rate cap law allows for higher interest income, which will push income and profits for banks.
“Interest rate cap fully transformed us to rely on other sources of income. Since parliament has removed the cap, interest income will only add to other sources,” said Equity Group CEO James Mwangi.
