Co-operative Bank Group’s rank as the most attractive bank in Kenya has improved to position two from position six in the third quarter.
The improvement has been attributable to the bank’s return on average equity of 7.3 percent, higher than the 14.2 percent recorded in Q3.
The report, themed: “Reduced Loan Provisions Spur Banking Sector Recovery in 2021”, ranked I&M Holdings first while KCB Group came third.
“The asset quality for listed banks improved in FY’2021, with the gross NPL ratio declining by 1.2 percentage points to 12.3 percent from 13.5 percent in FY’2020.
We, however, note that despite this marginal improvement in the asset quality, the NPL ratio remains higher than the 10-year average of 8.1 percent,” the report noted.
The listed banks’ management quality also improved, with the cost to income ratio improving by 16.9 percentage points to 56.4 percent, from 73.3 percent recorded in FY’2020, as banks continued to reduce their provisioning levels following the improved business environment during the period.
Four key drivers shaped the banking sector in FY’2021, namely; Regulation, Regional Expansion through Mergers and Acquisitions, Asset Quality, and Capital Raising.
“Mergers and Acquisitions remained a key theme in FY’2021, with the current environment providing opportunities for bigger banks with a sufficient capital base to expand and take advantage of the low valuations in the market to further consolidate and buy out smaller banks,” stated the report.
I&M Holdings’ rank recorded an improvement in the overall ranking to position 1 from position 3 in Q3 2021 attributable to a decline in the bank’s Gross NPL ratio to 9.5 percent from the 10.2 percent recorded in Q3 coupled with an improvement in the bank’s Cost to Income ratio.
KCB Group’s rank declined to the third position after being ranked position 1 in Q3, mainly due to a deterioration in the bank’s asset quality, as the Gross NPL ratio rose to 16.6 percent, from 13.7 percent recorded in Q3.
