CBK Report
Exchange rate $1 = 74.90 (November Close)
By JEVANS NYABIAGE Posted Saturday, November 28 2009 at 19:44


Deposits hit Sh1 trillion at Kenyan banks
Central Bank of Kenya (CBK) says the country’s banks have shown resilience in the face of economic slowdown with their assets growing by 11 per cent in the year ended September 30, to Sh1.31 trillion. Central Bank governor Prof Njuguna Ndung’u says although some banks have been reporting marginal growth in profitability, total deposits rose to Sh1 trillion at the end of September, encouraged by promotional initiatives and the expansion of their branch network.

During the launch of Barclays Bank of Kenya contact centre on Thursday, the governor said the number of new branches stood at 154 as of September 30, increasing the total to 918. The sector also recorded higher than required capital adequacy ratios, which is a measure of a bank’s capital. At the end of September, the capital adequacy ratio for the industry stood at 20 per cent, well above the required minimum of 12 per cent.

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“This is an indicator that the sector has a substantial cushion against periodic shocks,” Prof Ndung’u said. Most companies reported mixed third-quarter performances as different sectors react differently to the economic slowdown and the recovery efforts being pursued by the government.

Banks seem to be benefiting from increased interest income with non-interest revenue, mainly transaction fees, falling in what experts say is pressure from mobile money transfer and lower forex volatility. The global downturn and a severe drought stifled profit growth for Kenyan banks this year. Standard Chartered Bank Kenya managed to post a 41 per cent increase.

KCB released its third-quarter results showing a 32 per cent growth in interest income and 9 per cent decrease in non-interest earnings. Its regional expansion through which it has over 200 branches, pushed operating expenses up 21 per cent. This slowed profit before tax growth to 1.5 per cent to Sh5.3 billion. Infor: nationmedia.co.ke


Discussions on Kenyan Banking Sector.

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The Central Bank of Kenya was established in 1966 through an Act of Parliament - the Central Bank of Kenya Act of 1966. The establishment of the Bank was a direct result of the desire among the three East African states to have independent monetary and financial policies. This led to the collapse of the East Africa Currency Board (EACB) in mid 1960s.

Under the Central Bank of Kenya Act, the responsibility for determining the policy of the Bank, other than the formulation of monetary policy, is given to the Board of Directors. The Monetary Policy Committee of the Bank is responsible for formulating monetary policy.

The Board of Directors of the Bank consists of eight members:-
* the Governor, who is also its chairman
* the Deputy Governor, who is the deputy chairman
* the Permanent Secretary to the Treasury who is a non-voting member
* five other non- executive directors

All members are appointed by the President to hold office for a term of four years and are eligible for reappointment once, provided that a Board member shall hold office for not more than two terms. The executive management team comprises the Governor, the Deputy Governor and fifteen heads of department who report to the Governor. The Bank operates from its head office in Nairobi and has branch offices in Mombasa, Kisumu and Eldoret. The Bank also owns the Kenya School of Monetary Studies (KSMS) which is headed by an executive director answerable to the Governor.

To be a World Class Modern Central Bank
Section 4 of the Central Bank of Kenya Act states the core mandate of the Bank as follows: (1) the principal object of the Bank shall be to formulate and implement monetary policy directed to achieving and maintaining stability in the general level of prices; (2) the Bank shall foster the liquidity, solvency and proper functioning of a stable market- based financial system; and (3) subject to (1) and (2), the Bank shall support the economic policy of the Government, including its objectives for growth and employment.

The other objectives of the Bank are enumerated under Section 4A of the Act, and empower the Bank to :-
* Formulate and implement foreign exchange policy
* Hold and manage its foreign exchange reserves;
* License and supervise authorized dealers;
* Formulate and implement such policies as best promote the establishment regulation and supervision of efficient and effective payment, clearing and settlement systems;
* Act as banker and adviser to, and as fiscal agent of the Government; and
* Issue currency notes and coins.

In pursuit of the above outlined mandate, the Central Bank operations are organized into the following functional areas:
* Monetary policy
* Notes and Coins
* Bank Supervision
* Treasury securities
* Publications and Research
* National Payments System
* Deposit Protection Fund

CBK posts Sh23.2 billion profits as economy recovers

Wednesday, 10th March 2010
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Foreign exchange gains, sale of Grand Regency Hotel and reduced expenses due to less intervention in the money market has propelled earnings of Central Bank of Kenya (CBK).

The bank’s improved fortunes come with the economy in recovery lane after a two-year slow down. CBK made a historic Sh23.2 billion profit in the period ending June 30 last year.

This compares favourably to Sh8.9 billion made in 2008. Given the good earnings, the board of directors has recommended payment of Sh7.2 billion dividend for the year ended June 30, 2009 as opposed to Sh4 billion allotted the previous year.

As a banker, advisor and fiscal agent of the Government, CBK improved its performance even as the economy struggled due to effects of global financial crisis and severe drought.

"This higher performance over the previous year is due to foreign exchange translation gains, amounting to Sh13.4 billion in the year under review. This compares to a gain of only Sh54 million," said a director’s report contained in the CBK 2009 Annual report.

The bank’s performance was also pushed up by a Sh3.1 billion proceed from the sale of Grand Regency Hotel, an asset that it held as security.

Tight money supply
Also contributing to this bottom line was CBK’s reduced activity in the money market due to a tight supply of money.

Expenses associated with conduct of this monetary policy exercise were lower than the previous year by Sh1.3 billion. The report indicates that lower foreign currency earnings, which fell by 32 per cent or Sh3.3 billion, tampered the positive financial performance. The foreign exchange earnings were effected by the global financial crisis that took its toll on inflows.

The bank’s operating expenses, which includes such items as currency printing and property maintenance was also higher than 2008, by some Sh1.4 billion or 29 per cent.

The assets of the bank also increased by Sh36.5 billion (13 per cent), mainly due to balances due from global institutions that increased by Sh23.2 billion or 10 per cent.