Kenyan banks have failed to make it to the list of the top 10 highest movers in the Financial Times' latest listing of the World's top 1000 banks. This development is attributed to the stability of the Kenyan shilling against the dollar, which limited the dramatic dollar gains that Kenyan banks enjoyed in 2023. The stability of the shilling saw Kenyan lenders slip down the rankings at the expense of other lenders in countries where currencies strengthened against the dollar.
Last year, four Kenyan banks - KCB Group, Co-op Bank, Equity Group, and NCBA - ranked among the fastest-growing lenders in Africa. However, this year, none of them made it to the top 10 list. Despite this, Kenyan banks recorded increases in Tier 1 capital, assets, and pre-tax profits. The shilling had traded in a tight band of Sh129.00 to Sh129.92 against the dollar for an extended period, which contributed to the stability of the currency.
The Banker, a publication by Financial Times, noted that the stability of the shilling saw Kenyan lenders slip down the rankings. Kenyan banks were replaced on the list by lenders from Nigeria, Egypt, and Morocco, which benefited from gains of their local currencies compared to the greenback. The Nigerian banks, in particular, saw significant increases in Tier 1 capital following a sharp devaluation of the naira in 2023.
Kenyan banks also missed out on the list of African banks with the top five return on assets, a parameter they previously dominated. Return on assets measures the efficiency of a bank and is largely driven by wide interest spreads. The fall of Kenyan banks from the list signals a narrowing of the spread in the country. This development may be attributed to increased competition in the Kenyan banking sector.
Despite slipping down the rankings, Kenyan banks such as KCB Group and Equity Bank still maintained a strong presence globally. KCB Group ranked at position 542 globally, up from 590, while Equity was at position 573 compared to 590 the previous year. Other Kenyan banks, including I&M, Co-operative Bank, and NCBA, also made it to the list of the world's largest banks.
The Kenyan banking sector is considered competitive, with 14 of the banks ranked among the top 25 lenders in Africa having a presence in Kenya. Standard Bank Group, Absa Group, and Nedbank are some of the banks with a presence in Kenya. Kenyan banks, however, are yet to expand to South and West African nations due to their smaller size.
Kenyan banks have been able to reap huge benefits from their presence in Eastern African nations such as the Democratic Republic of Congo and South Sudan. These markets are considered volatile, limiting the number of entrants and allowing for wider margins to compensate for the risk. The acquisition of National Bank of Kenya by Access Bank and the entry of Zenith Bank into the Kenyan market are expected to increase competition in the sector.
Key points
- Kenyan banks have fallen off the list of the fastest-growing lenders in Africa due to the stability of the Kenyan shilling against the dollar.
- The stability of the shilling saw Kenyan lenders slip down the rankings at the expense of other lenders in countries where currencies strengthened against the dollar.
- Kenyan banks were replaced on the list by lenders from Nigeria, Egypt, and Morocco, which benefited from gains of their local currencies compared to the greenback.
