Why Kenyan Banks Are Making More Money Than Larger Nigerian Banks – Moody’s
The latest report by renowned ratings agency, Moody’s, shows that relatively-smaller Kenyan banks are making more money from their customers compared to their significantly larger counterparts in Nigeria. And this largely due to the incorporation of technology.
Per the data from Moody’s, Kenyan banks’ cost-to-income ratios averaged 49 percent over the last four years, compared with 57 percent for Nigerian banks.
Moody’s latest report had it that deployment of mobile channels as replacements for brick and mortar environments and hiring of third party agents have helped banks in Kenya cut the number of branches from 1,518 in 2017 to 1,505 in 2018.
In the same vein, the number of staff stood at 31,889 in 2018, increasing from 30,903 in 2017 but lower than the decade high of 36,923 in 2014.
“Kenyan banks’ cost-to-income ratios averaged 49 percent over the last four years, compared with 57 percent for Nigerian banks. This, together with lower provisioning requirements, supports the higher profitability of Kenyan banks,” Moody’s said.
However, the recent entry of Nigeria’s largest lender, Access Bank, into Kenya will give it exposure to the market that has learned to manage costs and tap into huge retail base through the mobile phone according to the agency.
Also, a number of Nigerian lenders including United Bank of Africa, Guarantee Trust Bank and lately, Access Bank, through the acquisition of Moi-linked Transnational, have a presence in Nairobi.
Compared to Lagos, Moody’s analysts say Nairobi has a superior cost-saving model compared which gives Kenyan banks the edge, helping them make more money than their bigger Nigerian counterparts.
Moody’s also pointed out that, now freed from the constraints of the rate cap, Kenyan banks are set to land a windfall that will boost earnings.
The removal of the rate cap brought increased interest in the banking counters at the Nairobi Securities Exchange that saw them rally on the expectation of future growth.
“Kenyan banks will continue to benefit from their higher net interest margins because the recent removal of interest rate caps on their lending will increase their loan yields,” Moody’s said.
Even as the Kenyan banks are releasing third-quarter figures which will not be affected by the recent removal of interest rate cap, the outlook for the future generally looks good.
Featured Image Courtesy: ebru.co.ke
