The Think Business Bank Performance Rating (TB-BPR) offers a streamlined yet reliable assessment of bank stability. This innovative rating system incorporates 12 crucial stability indicators, mirroring the global standards employed by leading rating agencies. By focusing on these key measures, the TB-BPR provides a comprehensive evaluation of a bank’s financial health and operational resilience.The rating methodology encompasses a range of critical factors, each carefully selected to provide a holistic view of a bank’s performance. These indicators delve into various aspects of banking operations, including but not limited to, capital adequacy, asset quality, liquidity, and profitability. By analyzing these fundamental elements, the TB-BPR aims to offer stakeholders, including investors, regulators, and customers, a clear and accurate picture of a bank’s overall stability.This rating system stands out for its simplicity and credibility, making it an invaluable tool for both industry professionals and the general public. By distilling complex financial data into a user-friendly format, the TB-BPR enables informed decision-making and promotes transparency in the banking sector.In the following sections, we will explore each of the 12 key stability indicators in detail, explaining their significance and how they contribute to the overall assessment of a bank’s stability.
Gross NPL/Total Loans (%)
The table presents data on Gross Non-Performing Loans (NPL) as a percentage of Total Loans for various Kenyan banks in 2023 and 2022. The banks are categorized into four tiers based on their asset size.
Key observations:
- The industry average NPL ratio increased from 13.79% in 2022 to 15.67% in 2023, indicating a general deterioration in loan quality across the sector.
- Tier I banks, which include the largest banks, saw their average NPL ratio rise from 12.96% to 14.98%. Notably, Equity Bank experienced a significant increase from 7.73% to 16.32%.
- Tier III banks had the highest average NPL ratio at 23.79% in 2023, up from 20.06% in 2022. Credit Bank and Premier Bank Kenya (formerly First Community Bank) showed particularly high NPL ratios of 44.04% and 64.63% respectively.
- Some banks managed to improve their NPL ratios, such as Standard Chartered Bank, which reduced its ratio from 14.19% to 9.72%.
The overall trend suggests that Kenyan banks faced increased credit risk in 2023, possibly due to economic challenges affecting borrowers’ ability to repay loans. This situation could potentially impact banks’ profitability and capital adequacy if it continues.
Loan Loss Provision/Operating Income (%)
This table presents data on Loan Loss Provision as a percentage of Operating Income for Kenyan banks in 2023 and 2022, categorized by tier.
Key observations:
- The industry average increased from 41.08% in 2022 to 45.78% in 2023, indicating higher provisioning across the sector.
- Tier I banks saw a significant increase in their average ratio, from 12.55% to 18.97%. Kenya Commercial Bank and Equity Bank showed notable increases of 16.32 and 15.39 percentage points respectively.
- Tier III banks had the highest average ratio at 68.19% in 2023, though this was an improvement from 81.81% in 2022.
- Some banks in Tier III and IV showed extremely high ratios, such as Credit Bank (150.50%), Premier Bank Kenya (167.47%), and Development Bank of Kenya (441.82%).
- A few banks managed to reduce their ratios significantly, such as ABC Bank (from 86.85% to 64.97%) and Kingdom Bank (from 62.31% to 37.77%).
The overall trend suggests that banks are setting aside more of their operating income for potential loan losses, which could impact profitability. This increase in provisioning might be a response to the higher NPL ratios observed in the previous table, reflecting a more cautious approach to credit risk management in the face of economic uncertainties.
Core Capital/Total Deposits Liability (%)
This table presents data on Core Capital as a percentage of Total Deposits Liability for Kenyan banks in 2023 and 2022, categorized by tier.
Key observations:
- The industry average decreased slightly from 14.94% in 2022 to 13.63% in 2023, indicating a minor reduction in capital relative to deposits.
- Tier I banks saw their average ratio decrease from 16.53% to 14.84%. Most Tier I banks experienced slight decreases, with I&M Bank showing the largest decline from 17.48% to 13.70%.
- Tier II banks maintained a stable average, slightly increasing from 16.74% to 17.04%. Bank of India showed a significant increase from 27.08% to 36.88%.
- Tier III banks improved their average ratio from 12.68% to 13.95%. Premier Bank Kenya showed a remarkable turnaround, moving from -2.38% to 24.21%.
- In Tier IV, Consolidated Bank remained the only bank with a negative ratio, worsening from -1.38% to -4.77%.
Overall, while there’s a slight decrease in the industry average, most banks maintain healthy ratios well above the regulatory minimum. This suggests that despite challenges, the Kenyan banking sector generally maintains strong capital positions relative to their deposit liabilities, providing a buffer against potential risks.
Core Capital/Total Risk Weighted Assets (%)
This table presents data on Core Capital as a percentage of Total Risk Weighted Assets for Kenyan banks in 2023 and 2022, categorized by tier.
Key observations:
- The industry average slightly decreased from 14.85% in 2022 to 14.00% in 2023, indicating a minor reduction in capital adequacy.
- Tier I banks saw their average ratio decrease from 15.34% to 14.61%. Most Tier I banks experienced slight decreases, with Equity Bank showing the largest decline from 17.19% to 14.21%.
- Tier II banks maintained a high average, though it decreased from 23.32% to 21.92%. Bank of India and Bank of Baroda stood out with very high ratios of 52.45% and 32.19% respectively.
- Tier III banks improved their average ratio from 13.18% to 14.30%. GT Bank Kenya showed a significant increase from 26.11% to 44.72%.
- In Tier IV, Consolidated Bank remained the only bank with a negative ratio, worsening from -1.27% to -4.46%.
Overall, despite the slight decrease in the industry average, most banks maintain ratios above the regulatory minimum, suggesting generally adequate capitalization relative to risk-weighted assets. However, the downward trend in some banks, particularly in Tier I, may warrant attention to ensure continued resilience against potential risks.
Return on Average Assets (%)
The table presents the Return on Average Assets (ROA) for Kenyan banks across four tiers for 2023 and 2022. Tier I banks, with assets over Ksh 250B, show a decline in average ROA from 4.45% in 2022 to 3.44% in 2023. NCBA Bank leads this tier with 6.56% ROA in 2023, while Diamond Trust Bank lags at 1.36%. Tier II banks (Ksh 75B-250B) improved slightly, with an average ROA increase from 2.63% to 2.77%. Citibank stands out with a 9.69% ROA in 2023. Tier III banks (Ksh 20B-75B) show improvement, with average ROA rising from 1.09% to 1.53%. GT Bank Kenya and Gulf African Bank perform well in this tier. Tier IV banks (<Ksh 20B) demonstrate the most significant improvement, with average ROA increasing from -0.44% to 1.62%. However, this tier also includes some of the poorest performers, such as Access Bank Kenya and Consolidated Bank. Overall, the industry average ROA decreased from 3.83% in 2022 to 3.18% in 2023, indicating a challenging year for Kenyan banks in terms of profitability relative to their assets.
Average Funding Cost (%)
This table presents the Average Funding Cost for Kenyan banks across four tiers in 2023 and 2022. The industry average funding cost increased from 3.35% in 2022 to 4.44% in 2023, indicating higher costs of funds for banks overall. Tier I banks (>Ksh 250B) saw their average funding cost rise from 3.06% to 4.09%. Standard Chartered Bank stands out with the lowest funding cost at 0.87% in 2023. Tier II banks (Ksh 75B-250B) experienced a more significant increase, with average funding costs rising from 3.95% to 5.54%. SBM Bank had the highest funding cost in this tier at 8.70%. Tier III banks (Ksh 20B-75B) also saw an increase, with average funding costs rising from 4.49% to 5.68%. Premier Bank Kenya had the lowest funding cost in this tier at 0.86%. Tier IV banks (<Ksh 20B) had the highest average funding cost at 5.96% in 2023, a slight increase from 5.85% in 2022. Development Bank of Kenya had the highest funding cost at 10.59%. The overall trend shows that smaller banks generally face higher funding costs, while larger banks benefit from lower costs of funds.
Return on Average Core Capital (%)
This table presents the Return on Average Core Capital for Kenyan banks across four tiers in 2023 and 2022. The industry average decreased from 33.84% in 2022 to 29.26% in 2023, indicating a general decline in profitability relative to core capital. Tier I banks (>Ksh 250B) experienced a significant drop, with average returns falling from 36.04% to 28.92%. Standard Chartered Bank leads this tier with 41.49% return in 2023. Tier II banks (Ksh 75B-250B) showed improvement, with average returns increasing from 19.58% to 20.63%. Citibank stands out with an impressive 58.16% return in 2023. Tier III banks (Ksh 20B-75B) also improved, with average returns rising from 12.16% to 16.29%. Bank of Africa showed remarkable improvement, increasing from 10.99% to 54.18%. Tier IV banks (<Ksh 20B) demonstrated the most significant improvement, with average returns increasing from -3.18% to 12.86%. However, this tier also includes some of the poorest performers, such as Access Bank Kenya with -50.17% return. The data reveals considerable variability in performance across and within tiers, with some banks showing resilience and others facing significant challenges.
Total Capital/Total Risk Weighted Assets (%)
This table presents the Total Capital to Total Risk Weighted Assets ratio for Kenyan banks across four tiers in 2023 and 2022. The industry average slightly decreased from 19.22% in 2022 to 18.68% in 2023, indicating a minor reduction in overall capital adequacy. Tier I banks (>Ksh 250B) saw a small decline in their average ratio from 18.48% to 17.99%. Co-operative Bank of Kenya leads this tier with a ratio of 22.52% in 2023. Tier II banks (Ksh 75B-250B) experienced a slight decrease, with the average ratio falling from 24.63% to 23.91%. Bank of India stands out with an impressive ratio of 52.96% in 2023. Tier III banks (Ksh 20B-75B) remained relatively stable, with the average ratio slightly decreasing from 17.33% to 17.19%. GT Bank Kenya showed significant improvement, increasing from 27.36% to 45.97%. Tier IV banks (<Ksh 20B) saw a decline in their average ratio from 21.74% to 19.41%. Most banks in this tier maintain healthy capital ratios, with M Oriental Commercial Bank leading at 29.58%. Overall, despite some fluctuations, most Kenyan banks maintain capital ratios well above the regulatory minimum, indicating general resilience in the banking sector.
Net Loans/Total Deposits
The Net Loans/Total Deposits ratio is a key indicator of a bank’s liquidity and lending practices. In 2023, the industry average decreased slightly to 63.57% from 67.12% in 2022, suggesting a general trend towards more conservative lending practices.
Among Tier I banks, Kenya Commercial Bank experienced the most significant decrease, dropping from 85.25% to 65.55%. This substantial change indicates a shift towards holding more deposits relative to loans, potentially improving liquidity but potentially impacting profitability.
Tier II banks showed mixed results, with some institutions like Bank of India and SBM Bank significantly increasing their ratios, while others like Ecobank maintained relatively stable positions.
In Tier III, GT Bank Kenya saw a dramatic decrease from 68.05% to 34.89%, suggesting a major shift in its lending strategy or deposit base. Conversely, Premier Bank Kenya (formerly First Community Bank) increased its ratio substantially from 95.17% to 113.61%, indicating more aggressive lending relative to deposits.
Tier IV banks generally maintained more stable ratios, with a few exceptions like Mayfair-CIB Bank, which decreased from 67.13% to 45.78%.
Overall, the data suggests a trend towards more conservative lending practices across the Kenyan banking sector in 2023, with some notable exceptions in specific tiers and institutions.
Quick Assets/Total Deposits Analysis
The Quick Assets/Total Deposits ratio is a measure of a bank’s liquidity, indicating its ability to meet short-term obligations using its most liquid assets. In 2023, the industry average remained relatively stable at 54.19%, compared to 54.28% in 2022.
Tier I banks showed varied performance. Diamond Trust Bank significantly improved its ratio from 54.63% to 115.56%, indicating a substantial increase in liquid assets relative to deposits. Conversely, ABSA Bank Kenya and Standard Chartered Bank experienced notable decreases in their ratios.
Among Tier II banks, Bank of Baroda saw a dramatic decrease from 148.49% to 77.33%, though still maintaining a strong liquidity position. Other Tier II banks generally maintained stable ratios, with slight fluctuations.
Tier III banks displayed more volatility. Premier Bank Kenya improved significantly from 16.40% to 44.80%, while Kingdom Bank experienced a substantial decrease from 261.47% to 32.48%. This suggests major shifts in the liquidity management strategies of these institutions.
Tier IV banks generally maintained high liquidity ratios, with most institutions showing ratios above 50%. However, Guardian Bank saw a significant decrease from 154.50% to 67.08%, though still maintaining a strong liquidity position.
Overall, while the industry average remained stable, individual banks across all tiers showed significant variations in their liquidity positions, reflecting diverse strategies in managing quick assets relative to deposits.
Quick Assets/Total Liabilities Analysis
The Quick Assets/Total Liabilities ratio provides insight into a bank’s ability to cover its total liabilities with its most liquid assets. In 2023, the industry average slightly increased to 47.85% from 47.65% in 2022, indicating a marginal improvement in overall liquidity.
Tier I banks showed mixed results. Diamond Trust Bank significantly improved its ratio from 49.19% to 100.92%, suggesting a substantial increase in liquid assets relative to total liabilities. Conversely, ABSA Bank Kenya and Standard Chartered Bank experienced notable decreases in their ratios.
Among Tier II banks, Bank of Baroda saw a dramatic decrease from 147.38% to 75.90%, though still maintaining a strong liquidity position. Citibank also experienced a significant decrease from 76.12% to 49.94%.
Tier III banks displayed more volatility. GT Bank Kenya improved from 53.31% to 83.00%, while Kingdom Bank experienced a substantial decrease from 76.76% to 13.44%. This suggests major shifts in the liability management strategies of these institutions.
Tier IV banks generally maintained relatively high liquidity ratios, with most institutions showing ratios above 40%. However, Guardian Bank saw a significant decrease from 147.73% to 64.33%, though still maintaining a strong liquidity position.
Overall, while the industry average remained relatively stable, individual banks across all tiers showed significant variations in their liquidity positions relative to total liabilities, reflecting diverse strategies in managing quick assets and liabilities.
Efficiency Ratio Analysis
The Efficiency Ratio measures a bank’s operating expenses as a percentage of its revenue, with a lower ratio indicating better efficiency. In 2023, the industry average increased slightly to 46.93% from 44.58% in 2022, suggesting a minor decline in overall efficiency.
Tier I banks generally maintained stable efficiency ratios, with most institutions showing ratios between 40% and 50%. Equity Bank experienced the largest increase, from 42.01% to 48.63%, indicating a potential decrease in efficiency.
Among Tier II banks, there was significant variation. Bank of Baroda and Bank of India maintained very low ratios (19.87% and 13.32% respectively), indicating high efficiency. However, National Bank of Kenya saw a substantial increase from 74.91% to 105.06%, suggesting a significant decline in efficiency.
Tier III banks showed mixed results. Credit Bank improved significantly, reducing its ratio from 116.09% to 91.17%, while still remaining relatively inefficient. Gulf African Bank also improved, decreasing its ratio from 60.71% to 52.39%.
Tier IV banks generally displayed high efficiency ratios, indicating lower efficiency. Access Bank Kenya and DIB Bank Kenya had particularly high ratios (154.11% and 123.70% respectively), though DIB Bank Kenya improved significantly from its 2022 ratio of 201.77%.
Overall, while some banks improved their efficiency, the slight increase in the industry average suggests a general trend towards decreased efficiency across the Kenyan banking sector in 2023, with significant variations among individual institutions.
