Equity, Stanbic top in non-loan income

Cytonn chief executive Edwin Dande. PHOTO | JOSEPH KANYI | NMG 

In Summary

• Lenders seek alternative sources of earnings to bridge the gap left by rate capping
• Stanbic and Equity made 44.2 and 42 per cent respectively of income from non-funded sources
• Among the listed banks, DTB had the lowest non-funded income as a proportion of the total at 21.1 per cent.

By GEOFFREY IRUNGU
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Stanbic and Equity #ticker:EQTY banks top listed banks that are exploiting fees and commissions income to raise non-funded revenue as rate caps bite.

A report prepared by Cytonn Investment shows Stanbic and Equity made 44.2 and 42 per cent respectively of income from non-funded sources — mainly fees and commissions — as a proportion of the total income.

The other top banks with a high proportion of non-funded income were Coop Bank #ticker:COOP followed by KCB Group #ticker:KCB and StanChart #ticker:SCBK. The fees and commission mitigated the impact of the restrictions placed on lending rates by the law that was enacted in September 2016.

For Equity Bank, the impact was significant because the it registered an earnings per share growth of 14 per cent, the highest for a tier-one bank in a year when the rate caps were fully in force.

“Non-funded income has grown by 9.0 per cent, which included a fee and commissions growth of 13.3 per cent.

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'More fee income'

“This shows that banks are charging more fee income to improve their income on loans above the rate cap maximum,” said Cytonn.

Among the listed banks, DTB had the lowest non-funded income as a proportion of the total at 21.1 per cent.

This was in a year when the total market cap-weighted average non-funded income to total operating income stood at 33.6 per cent.

In terms of loan-book growth, which shows a bank’s potential for continued earning of interest income, I&M Bank had the biggest at 13.6 per cent.

It was followed by KCB Group that grew its loans and advances by 9.6 per cent.

Loan book shrunk

Barclays Bank and HF Group saw their loan books shrink — the only ones that experienced this phenomenon among the listed banks.

The average loan-book growth for the entire group of listed banks stood at slightly above six per cent.

Despite the positive loan-book growth, the interest income declined by 2.4 per cent, a development that Cytonn attributed to the rate caps.

“Average loan growth has been recorded at 6.1 per cent; however, interest income has decreased by 2.4 per cent, showing the effects of the rate cap,” said Cytonn.

That means investors will be looking at capacity to grow non-interest income going forward.