central bank of kenya

The Central Bank of Kenya says that generally, the banking sector was sound and stable and recorded improved performance in 2012 as indicated by Total net assets which increased by 15.3 percent from Ksh. 2.02 trillion in December 2011 to Ksh. 2.33 trillion in December 2012, with the growth being supported by the increase in loans and advances. Customer deposits which grew by 14.8 percent from Ksh. 1.49 trillion in December 2011 to Ksh. 1.71 trillion in December 2012.

The growth was attributed to increased deposit mobilization by banks as they expanded their outreach and opened new branches to tap new customers. Adoption of the agency banking model also helped banks to upscale their deposit levels. The pre-tax profit for the sector which increased by 20.6 percent from Ksh. 89.5 billion in December 2011 to Ksh. 107.9 billion in December 2012. The growth was largely attributed to income generated by increased loans and advances coupled with regional expansion initiatives. Gross loans which grew by 11.7 percent from Ksh. 1,191.0 billion in December 2011 to Ksh. 1,330.4 billion in December 2012. The growth in loans is attributed to increased demand for credit by the various economic sectors. The sector’s average liquidity which increased from 37.0 percent in December 2011 to 41.9 percent in December 2012, and way above the statutory minimum of 20.0 percent. The sector’s capital adequacy, which is measured by the ratio of Total Capital to Total Risk Weighted Assets, which increased from 21 percent in December 2011 to 23 percent in December 2011, and way above the statutory minimum of 12.0 percent. However, the ratio of non-performing loans to gross loans increased from 4.4 percent in December 2011 to 4.7 percent in December 2012. The increase in non-performing loans signalled an increase in credit risk which was largely attributable to high interest rates in the first half of 2012. CBK enhanced surveillance on institutions experiencing deteriorating asset quality.

The Kenyan banking sector is expected to sustain its growth momentum supported by the increased regional expansion of local banks and exploitation of untapped huge domestic potential as the devolved county government system takes effect.