This year, commercial banks are profiting by about Sh1 billion every day as a result of cost-cutting measures and increased demand for loans in a strengthening economy.
According to Central Bank of Kenya (CBK) data, the lenders made a pre-tax profit of Sh97.4 billion in the first five months of this year, which translates to Sh910 million per working day. This is based on a five-day week with few weekend transactions on Saturday, when the lenders are open for only half the day.
The earnings over the past five months have increased by 27% compared to the Sh76.4 billion they brought in during the same time last year. If things continue as they are, the industry will set a new full-year pre-tax profit record of more than Sh200 billion.
Increased dividends for shareholders, who received a total distribution of Sh51.7 billion last year, will result from record profitability.
Additionally, executives spearheading the expansion might expect larger bonus payments, which are often based on performance and shareholder value.
The top-paid bankers receive bonuses that can be up to two times their annual salary, especially for chief executives, giving them an annual salary of more than Sh100 million.
As important industries including manufacturing, trade, and transportation continue their Covid recovery, the banks have benefited from an increase in credit demand in the economy this year. Annual private sector credit growth increased significantly from 8.8% in January to 11.98% in May.
According to an analysis of the banks’ published financial accounts for the three months ending in March, interest income for the nine listed tier one institutions totaled Sh116.9 billion, up from Sh100.1 billion a year earlier.
Additionally, they have taken advantage of the government’s prodigious demand for borrowing by investing billions of dollars in treasuries at interest rates ranging from 8.3 percent to 14 percent.
The lenders now make an average of Sh19.4 billion each month thanks to increased interest income, greater fees and commissions from lending services, and foreign exchange trading.
On the other hand, many bank customers are struggling as a result of a significant increase in living expenses, with inflation currently at a 58-month high of 7.9 percent.
