This archive report was first published on 28 November 2019.
On November 28, 2019, Moody's released a report highlighting the efficiency of Kenyan banks compared to their Nigerian counterparts.
Kenyan banks have successfully implemented technology-driven solutions, such as mobile channels and third-party agents, to reduce the number of branches and staff. According to the Central Bank of Kenya, the number of branches decreased from 1,518 in 2017 to 1,505 in 2018, while the number of staff stood at 31,889 in 2018, lower than the decade high of 36,923 in 2014.
Moody's noted that Kenyan banks' cost-to-income ratios averaged 49 percent over the last four years, compared to 57 percent for Nigerian banks. This, combined with lower provisioning requirements, supports the higher profitability of Kenyan banks.
The entry of Nigeria's largest lender, Access Bank, into the Kenyan market is expected to give it exposure to a market that has learned to manage costs and tap into a huge retail base through mobile phones.
Moody's also pointed out that Kenyan banks, unshackled from the constraints of the rate cap, are set to benefit from increased interest rates, which will boost their earnings.
“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.
