By MARTIN MWITA
DTB and Co-operative Bank of Kenya are leading Tier 1 banks in extending affordable credit to borrowers, giving them the much-needed relief that came with a cut in CBK’s base lending rate.
This is even as lenders in the country expect a further slash on the rates as the Central Bank of Kenya’s Monetary Policy Committee meets tomorrow, with lenders keen to extend the same to individuals, businesses and corporates in what they say will stimulate the credit market and drive economic growth.
Co-op and DTB are among the top banks that moved to effect cuts after CBK reduced the base-lending rate in August from 13 per cent to 12.75 per cent.
CBK’s latest weighted average lending rates by banks data shows the two remain the most competitive lenders among top banks, at average lending rates of 12.41 per cent for DTB and 15.14 per cent for Co-operative Bank, lower than the average interest rates being offered by other major Nairobi Securities Exchange listed banks.
This reflects on the growth in respective loan books even as overall growth in commercial banks lending to the private sector remained low in June, at four per cent compared to 4.5 per cent in May.
Co-op Bank’s half-year net loans and advances grew to Sh375.6 billion, a 2.8 per cent growth from Sh365.4 billion in 2023, with customer deposits growing to Sh507.4 billion, a 9.4 per cent increase from Sh463.9 billion same period last year.
This is as its net profit grew to Sh13 billion compared to Sh12.1 billion reported in 2023, with shareholders’ fund growing by close to Sh12 billion to Sh126.7 billion, driven by the strong growth in retained earnings of Sh15.1 billion. Mco-op Cash mobile wallet continues to drive substantial non-funded income streams with Sh36.4 billion in loans disbursed in 1H2024, averaging Sh6.1 billion per month.
"The strong performance by the bank is in line with the Group’s strategic focus on sustainable growth, resilience, and agility delivering a Return on Equity of 22.1 per cent,’’ Co-op Bank Group MD Gideon Muriuki said.
The Sh717 billion asset-base bank recently joined Safaricom, KCB Group, Equity Group and East African Breweries on the MSCI Inc, a top index that provides indices and other decision-making tools for the global investment community. During the same period, Diamond Trust Bank announced a Sh4.9 billion net profi t representing a 12 per cent growth.
The lender which has been strong in key sectors such as trade, manufacturing, real estate, and construction, has diversified and expanded its focus on new sectors, including agriculture, education, technology, and the public sector.
DTB and Coop Bank are leading other top-tier banks in extending affordable credit with Equity coming in third with an average lending rate of 16.12 per cent.
KCB is at 16.38 per cent, NCBA at 18.73 per cent while Absa is lending at an average 19.92 per cent.
Average overall interest rates by all 38 listed commercial banks stood at 16.78 per cent in August, data by the Central Bank of Kenya shows but some lenders have been giving loans with interest rates as high as 25 per cent.
The CBK lowered its benchmark lending rate by 0.25 percent on August 6,2024 to 12.75 percent from 13 percent previously, noting a scope for the gradual easing of monetary policy amid a fall in overall inflation and continued exchange rate stability.
Most Tier 1 banks moved to communicate their new rates to customers as they equally effected cuts even as the country’s banking sector adopted risk-based credit pricing where a borrower’s rate is based on perceived risk.
Nine banks — KCB, Equity, Co-operative Bank, NCBA, Absa (Kenya), Standard Chartered Bank (Kenya), I&M, Diamond Trust Bank (DTB) and Stanbic Bank Kenya control more than 80 per cent of the industry’s total assets.
With the MPC sitting tomorrow, commercial banks expect a further cut in the benchmark lending rate, a move they say will boost economic growth.