Regional banks among world’s top performers

At least four banks operating within East Africa were named among the world’s 1,000 best financial institutions.

The banks, which include Equity, KCB, Diamond Trust and Co-operative Bank, only in Kenya, the report says weathered a tough operating environment in 2019 to post stronger growth while cushioning themselves against further shocks.

The monthly London-based international financial affairs publication - The Banker – published by the Financial Times, shows that the four banks, which are largely retailers, remained resilient and maintained an upward growth in profitability.

They made significant strides in strengthening their balance sheets (assets) and increasing their Tier 1 capital in line with the Basel III requirements.
Tier 1 capital is largely primary funding source for banks, reserved to ensure banking operations are not disrupted or shut down during periods when lenders make losses.

Total global profits
According to the publication, global banks’ total profit increased by just 2 per cent to $1.13 trillion in 2019 from $1.11 trillion in 2018.
This is largely due to tighter regulations, high capital requirements, competition from financial technology firms and low interest rates in Europe and the US which made earnings and banking profit so difficult to sustain.

The publication also indicates that shrinking banking assets in Europe and Central Asia, lackluster profits across the globe and an uncertain economic environment, paint a grim picture of the global banking industry’s earning prospects.

The ranking, which saw Chinese banks dominate the top four positions, measured the world’s best performing banks based on key parameters such as profitability, Tier 1 capital, assets, return on Assets, non-performing loans ratio, total loans to assets ratio and profit on capital ratio.

KCB which operates in Uganda, Kenya, Tanzania, Rwanda, Burundi and South Sudan improved its position to 717 from 809 last year after posting a 17.87 per cent growth in profitability to $332m.
The bank also increased its Tier 1 capital by 30.71 per cent to $1.07b.
Its balance sheet grew 11.96 per cent to $7.013b while the capital assets ratio increased to 15.39 per cent, up from 13.18 per cent.

The bank’s return on assets stands at 3.36 per cent, non-performing loans ratio (6.07 per cent) and the loans to assets ratio (65.83 per cent).
Equity, with over 14 million customers across the region, has operations in Uganda, Kenya, Rwanda, Tanzania, South Sudan, DR Congo and a commercial office in Ethiopia.

The bank’s position on the global 1,000 ranking fell to 844 from 799 partly due to a decline in the level of Tier 1 capital to $772m.
However, the bank managed to grow its profit by 7.32 per cent to $279m and increased its level of assets by 10.81 per cent to $5.63b.

Its return on assets stood at 3.46 per cent while NPL ratio stood at 7.85 per cent. Loans to assets ratio stood at 53.31 per cent while capital asset ratio declined to 13.72 per cent from 16.7 per cent

Other key performers

Co-operative Bank which has a regional subsidiary in South Sudan improved by one position to 950 from 951 last year, with its Tier 1 Capital increasing by 3.73 per cent to $571m and total assets increasing by 8.31 per cent to $4.05b.
The bank made a 12.23 per cent growth in profit to $178m but saw a slight decline in capital asset ratio to 14.08 per cent from 14.7 per cent.
Its NPL ratio stood at 10.3 per cent, while return on assets stood at 3.08 per cent. Loans to assets ratio stood at 66.47 per cent.

DTB which has a foothold in Kenya, Tanzania, Uganda and Burundi came in at position 981 after increasing its Tier 1 capital by 13 per cent to $527 million and growing its balance sheet by 5.38 per cent to $3.7 billion.
Its earnings increased 10.41 per cent to $108 million while the capital asset ratio increased to 14.21 per cent.

Grim picture

Banking industry: The publication also indicates that shrinking banking assets in Europe and Central Asia, lackluster profits across the globe and an uncertain economic environment, paint a grim picture of the global banking industry’s earning prospects.