The Bank of Uganda released a financial stability report which indicated that Kenyan banks shareholders’ enjoyed the highest returns compared to their East African peers, aided by lower operating costs and wider interest margins. Below is the summary of the report:
- •Kenyan banks had a return on equity of 28.3% as at June 2015, higher than in Uganda (24.6%), Tanzania (15.1%), Rwanda (13.1%) and Burundi (8.1%),
- •Ugandan banks ranked highest with respect to return on assets at 3.8%, with Kenya at 3.3%, Tanzania at 2.9% and Burundi at 1.2%,
- •Kenyan banks benefitted from aggressive lending with loan growth at 21.9%, compared to 19.7% in Uganda,
- •Deposit growth in Kenya was at 19.5% compared to 16.5% in Uganda,
- •As a result of the volatile interest rate environment witnessed in a number of East African countries, especially Kenya and Uganda, the NPL’s to total loans ratio was at 5.7% for Kenya, compared to 4.0% in Uganda and 6.3% in Rwanda,
- •As a result of efficient alternative channels of distribution, Kenyan banks benefited from operation efficiency, as reflected in the favourable cost to income ratio (CIR) at 51.0%, compared to a CIR of 68.7% and 78.6% in Uganda and Rwanda, respectively.
Going forward as Kenyan banks continue to expand into the region, the margins might be lower in the short term but given the East African Community push, the efficiencies being enjoyed in Kenya can easily be adopted in the region.
