Co-operative Bank’s loan book jumped 15 per cent at the end of March to post the largest year-on-year growth in credit among listed lenders despite interest rate caps putting breaks on lending.
The bank was followed by KCB at 14.3 per cent growth, Stanbic Kenya’s 11.4 per cent jump to Sh115.3 billion and Barclays’ 10.7 per cent to close at Sh168.7 billion.
The first quarter results for 2017 marks a period during which the law capping interest rates at four percentage points above the signal rate entered its second quarter.
Analysts at Cytonn attributed Co-op Bank’s credit growth to the lender’s loan book diversity and the move to become the first player to lower its loan rates to comply with the ceiling set by the law.
“The bank seem to be benefiting from the first mover advantage during the time when there was no clarity on loan pricing mechanism following the Banking Act Amendment Act 2015,” said Maurice Oduor, investment manager at Cytonn.
“It was mainly supported by corporate, personal and SME book which together accounts for about 65 per cent of the loan book. SME loan book grew to account for 8.8 per cent of the loan book from 6.8 per cent.”
Troubled National Bank posted the biggest loan book shrinkage to Sh58.1 billion in March from Sh66.3 billion in March 2016, a drop of 12.3 per cent, among publicly traded banks.
“We feel we can substantially compensate for the lost interest income caused by rate caps, by pushing higher volumes. Our pricing was already low, with our average lending rate at 17 per cent per annum prior to rate caps. So we didn’t receive a ‘killer hit’ with the coming of rate caps,” Co-op Bank group CEO Gideon Muriuki told the Daily Nation.
Equity Bank was the only other listed lender to have its loan book contract year-on-year to Sh261 billion from Sh275 million in the first quarter of last year.
“Most of these banks found it difficult to price their clientele within the current pricing framework, especially banks that have risky SMEs as major clients such as Equity Bank.
“The cautious loan underwriting approach by the bank might have led to the reduction of the size of loan book,” Cytonn said.