Eastern Africa Banking Sector - EY

92
Eastern Africa Banking Sector Strong economies stimulate asset growth, A review of the 2013 calendar year

Transcript of Eastern Africa Banking Sector - EY

Eastern Africa Banking Sector Strong economies stimulate asset growth,

A review of the 2013 calendar year

CONTENTS

FOREWORD 03

EXECUTIVE SUMMARY 04

SPECIAL TOPIC: CREDIT REFERENCE BUREAUS 13The importance of credit in the economy 14

How CRB’s support Financial Sector growth 15

Findings from the survey 16

Conclusion 18

ECONOMIC REVIEW 19Economic growth 20

Gross domestic product 21

Foreign exchange rate (to the US$) 22

TANZANIA BANKING SECTOR OVERVIEW 23Banking sector growth 24

Capital adequacy 32

KENYA BANKING SECTOR OVERVIEW 39

Capital adequacy 46

UGANDA BANKING SECTOR OVERVIEW 51

Capital adequacy 58

RWANDA BANKING SECTOR OVERVIEW 63

KURT BANKING SECTOR ANALYSIS 75

Concluding remarks 80

Eastern Africa Banking Sector: 1

The Eastern Africa Banking Sector review 2013, covering

Kenya, Uganda,Rwanda and Tanzania known as KURT, is

key performance metrics in the banking sector, providing

perspectives that contribute to building the knowledge

Our region continues to attract growing interest from a

Whilst a number of other emerging markets stalled in recent

banking sector will play a fundamental role in driving the

Our special topic this year focuses on the role of credit

extension, and how that in turn could help stimulate

Joseph SheffuCountry LeaderEY Tanzania

Eastern Africa Banking Sector: 3

EXECUTIVESUMMARY

EY - All rights reserved 20144

highlight the following points:• Total KURT banking assets rose by 15% to US$ 52bn in

-

• Bank assets grew three times faster than GDP in

• declining interest rates – in three of the four KURT

• Kenya remains the dominant banking market in the region, holding more than half of total banking assets, with growth outpacing that of its regional

• KURT’s share of the total sub-Sahara African banking market is gradually rising although South Africa remains by far the

• Large banks typically enjoy stronger economies of scale

globe, and KURT is no exception, although Rwanda stands out as a market where smaller banks enjoy some noticeable

• to stimulate credit growth, and further down the line,

• provide will come at a cost in the short-term, as information

16%

13%

14%

12%

Kenyan banking assets grew

Ugandan banking assets grew

Tanzanian banking assets grew

Rwandese banking assets grew

to Kshs 2,7 billion (2.3bn)

to Ushs 17,2 billion (15.3bn)

to Tshs 18.9 billion.

to Rwf 1,3 billion (1.16bn)

Kenya60%

4%

13%

23%Tanzania

Uganda

Rwanda

Share of bank assest

Eastern Africa Banking Sector: 5

Financial inclusion in the banking sector is rising, as evidenced in Tanzania, Kenya, Rwanda and Uganda. This is in line with stronger economic growth, which is successfully incorporating more people into the formal economy.

remains low, even by emerging market standards, the banking sector has seen its retail client base rise by nearly half over the

of this critical function, credit bureaus can play a vital role by

Credit histories not only provide necessary input for credit underwriting, but also allow borrowers’ credit history to be

competitive lending markets and, ultimately, more affordable

people, and enabling lenders and businesses to reduce risk and

respect of customer credit behaviour, therefore, has a positive

Growth provides a stimulus to the banking sector

Within the KURT region, economic growth is undoubtedly

forecasts that Uganda’s economy will double in size between

Smaller markets enjoy higher margins but weaker economies of scale

larger economies of scale, and that results in higher returns to shareholders than is the case in the smaller markets (namely

ON FINANCIAL INCLUSION AND CREDIT REFERENCE BUREAUS

EY - All rights reserved 20146

higher margins than those in the larger markets, even if their

by global standards, and in line with banks in many emerging

considerable 240 basis point gap between its banks and

Country Capital adequacy ratio %

Kenya 16.0

Tanzania 13.6

Uganda 16.6

Rwanda 16.7

Average 15.7

The banking outlook remains promising

will continue to support growth in the banking sector in the

sector in the KURT region, the strongest growth will likely stem

The role of credit bureaus is also likely to play a major role in

availability of information, which in turn will stimulate banking

Strong growth will most certainly attract the attention of more

institutions will also no doubt seek to build a presence across

Eastern Africa Banking Sector: 7

METHODOLOGY AND APPROACH

Kenya

• There are 42 registered banks on The Central Bank of

-

- For comparison purposes, subsidiaries and branch operations outside Kenya were not included in the analysis

• The data is presented in thousands of Kenyan shillings

Rwanda

Uganda

Tanzania

from the analysis, given that their results include major

- Two banks started operations: UBL in May, and Maendeleo in September

- Maendeleo Bank commenced operation as a public limited company and is listed on the Dar es Salaam Stock Exchange

-for 2013 could not be obtained and hence the data is unaudited

-

December 2013 as per Bank of Tanzania)

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Algeria Libya Egypt

Mauritania Mali

Côte d’Ivoire Gabon

Equatorial Guinea

Congo

Central AfricanRepublic

Cameroon

Nigeria

Niger Chad Sudan Eritrea

Ethiopia

SomaliaKenyaDemocratic

Republic ofCongo

Rwanda

Rwanda

Burundi Tanzania

Tanzania

Seychelles

Comoros

MalawiZambiaMauritius

Mad

agas

car

Reunion

Zimbabwe

Angola

NamibiaBotswana

South Africa LesothoSwaziland

Guinea

Sao Tome

Djibouti

Morocco

Burkina Faso

Ghan

a

Uganda

Uganda

Togo

Benin

Tunisia

CapeVerde

GambiaSenegal

LiberiaSierra Leone

GuineaBissau

Mozambique

SouthSudan

Kenya

Geographical representation of KURT

Eastern Africa Banking Sector: 9

SEGMENTATION

The report segments banking institutions into three key groupings in the case of Kenya, Uganda, and Rwanda, and four in the case of Tanzania. The peer groups are based on asset

Kenya, as laid out in the tables below.

Tanzania

Banks are classified by size, with NBFI’s classified separately

Large Medium Regional and Small

Barclays Access Advans

Citibank Akiba Amana

CRDB Azania Covenant

Exim BancABC DCB

Bank M Efatha

BOA Kagera

Stan Chart BOB Kili Coop

Stanbic BOI Maendeleo

CBA Mbinga

DTB Meru

Ecobank Mkombozi

Equity

Mwanga

Habib

IandM TCB

ICB TWB

KCB UBL

TIB Uchumi

TPB

Twiga UBA

Note:

regulated deposit taking institutions other

EY - All rights reserved 201410

Kenya

Peer groups

Large Medium Small

Barclays IandM ABC

CfC BOA Consolidated

Co – op BOB Credit

Equity BOI DBK

KCB CBA Equatorial

STD Chase Fidelity

Citibank Fina

DTB First

Ecobank Giro

Family Guardian

Housing Gulf

Imperial Habib

Habib AG

Jamii Bora

Prime K-Rep

Middle

Oriental

Paramount

Trans

UBA

Victoria

Eastern Africa Banking Sector: 11

Uganda

Peer groups

Large Medium Small

Stanbic HFB Tropical

Stan Chart Orient Ecobank

Barclays BOA UBA

Crane DTB Fina

Cantenary KCB CIB

DFCU Equity GTB

Citibank Imperial

BOB ABC

FTB

BOI

Rwanda

Peer groups

Large Medium Small

IandM Access Equity

BOK BRD

BPR Cogebanque

Ecobank GTB

KCBR

The analysis is focused on three main areas, namely:

1

2

3 Capital Adequacy.

EY - All rights reserved 201412

SPECIAL TOPIC: CREDIT REFERENCE BUREAUS

Eastern Africa Banking Sector: 13

What is a credit bureau?

A Credit Bureau is an organization that compiles information relating to the identity, public record, legal history, credit transactions and credit history of Individuals and Commercial

A Credit Bureau is an essential element of a country’s

providing information which enhances credit availability and

a role in minimising information asymmetry between borrowers and lenders (providing borrowers comfort by understanding the

Credit bureaus provide this information to contracted, eligible subscribers, in the form of Credit Information Reports

Types of Credit Reference Bureaus (CRB)

Depending on the regulatory environment, the availability of and willingness to share credit information by data owners and the technological maturity of the market, the following types of Credit Bureaus may be established:

• Basic Credit Bureau Provides negative credit information only

• Full Credit Bureau Provides negative and positive credit information

• World Class Credit Bureau Provides the following services

-

-

-registries, courts, immigration etc)

-monitoring of Individual and commercial entities’ credit reports, and credit scoring

-

Credit Reference Bureaus in East Africa

The introduction of Credit Reference Bureau services in the

Absence of a CRB in East Africa has been a major hurdle to

Central banks, by way of their mandated responsibility, supervise the operations of CRB’s to ensure that the information collected is managed securely and responsively at all times and in accordance with the agreement between

specify the standards that the CRB shall implement in order to

passed the act in 2008 and there are currently two credit

Uganda passed its CRB regulation on 01 July 2005 and has

In Rwanda there was one CRB operating as of 31 December

Tanzania passed regulation in December 2012 and there are two CRB’s operating

The importance of credit in the economy

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1. Providing timely and accurate information

This is achieved through providing timely and accurate

compete with each other for customers, multiple borrowing

institutions do not have access to databases that capture

screening loan applications by enabling lenders to identify

An improved pool of borrowers - more and more unbanked

Recent research based on information from several countries (Singapore, Iraq, China, Romania, Vietnam, Cambodia, Brazil, and Hong Kong) show that the existence of credit registries facilitates increased lending volumes, growth of consumer

3. Reducing default rates

Default rates decline as borrowers seek to protect their

With the presence of a CRB, there is strong motivation for

Credit reports that include both positive and negative information help build reputation collateral in much the same way as a pledge of physical collateral, which may improve credit

In the long run, a bigger credit market and lower default

• To Lenders

-

-

-

-borrower

-

• To Borrowers

- Helps to build reputation through a history of responsible credit lending

- Provides access to credit to deserving borrowers

- Rewards good borrowers by easing access to credit at lower interest rates

- Enables borrowers to monitor and improve their credit records

• To Regulators

-

- Provides comprehensive and constantly updated data on borrowers and lenders – effective credit risk monitoring for the economy

- Facilitates credit expansion without compromising on the quality of credit

- Reduces non-performing loans and the probability of loan defaults

How CRB’s support Financial Sector growth

Eastern Africa Banking Sector: 15

Contribution of CRB’s to increasing

Research by Armstrong, (2008) based on information from several countries across the globe show that the existence of credit registries is associated with increased lending volumes, growth in consumer

Further, Hansen et al, (2004), highlighted that many borrowers make a lot of effort to repay their loans, but do not get rewarded for it because this good repayment history is not available to any bank they

fail to repay their loans, banks are forced to pass on the cost of defaults to other customers through

allows banks to better distinguish between good and

Angulin and Scapens, (2000) in their study indicated

lenders to assess the credit worthiness of potential

Findings from the survey

assessing loans applications

When asked if they make use of a CRB in assessing loan application, 50% of the institution that responded said that

making the lending decision

When asked on the usefulness of the information provided by

Very useful50%50%

Useful

Usefulness of information provided by

CRB

Banks are evenly split on the value of CRB information

EY - All rights reserved 201416

Lending decision

When asked whether CRB’s can enhance the lending

lending decisions, with only 8% believing it will not

Reduce the amount of non-performing loans

When asked whether they believe that CRB will reduce the

debts, on the understanding that their credit performance is being monitored and will be shared by other banks for credit

Challenges in rolling out CRB’s

In terms of challenges, data quality, level of awareness about credit references, and data suppression feature most

Other challenges likely to be faced are:

When asked whether the use of CRB’s will lead to more loans

of respondents said yes

Will have no impactNo

Yes

Lending decisions

89%

8%3%

Banks are

lending decisions

95%

5%

Yes No

34%

24%

19%

23%

Data Quality Level of awarenessabout CRB

Absence of law making it mandatory for lendors to use CRB as part of the credit risk assessment

Data suppression

36% said no and 5% said it will have no impact

58%

RespondentsChallenges

Eastern Africa Banking Sector: 17

However, access to CRB date, coupled with projects linked

whether banks will pass the higher costs on to their clients

Micro credit extension

Reduce moral hazard

Reduce borrowing costs

Reduce loan defaults

Enable increased lending @ lower risk

Enhance risk id / monitoring

10.5%

11%

23.5%

21%

20%

13%

Credit reference bureaus are expected to give the Tanzanian

It is anticipated that greater loans will be granted and will assist banks in reducing the number of non-performing

will have the effect of enabling greater economic activity, thus

EY - All rights reserved 201418

ECONOMIC REVIEW

Eastern Africa Banking Sector: 19

Growth across east Africa has so far proved resilient to emerging market turmoil. Slower growth in Rwanda in 2013 was offset by stronger growth in both Kenya and Uganda, while Tanzania’s growth held steady.

East African economies did not experience the currency volatility that knocked many emerging markets in 2013

experienced sharp depreciation in the value of their currencies, which resulted in deteriorating terms of trade and the prospect

However, some of the KURT countries could become vulnerable to external shocks, given that the major contributors to emerging market currency depreciation have been countries

Economic growth: KURT in context of emerging markets

13.3

-55.7

-5.8

-35.3 25.5

-4

-18.5

-7.7

-18.1

-4

-12.3

-6.2

-11.5

-5

-11.3

-2.8

-10.2

-1.8

-8.7

-12.5

-6.2

-8 -6.3

-2.7 -4.7

-6.3 -6.3

-4

-6.4

-4-2.1

-4.4

-6.1 3.3

-3.6

-2.9

-3.4

-1.7

-1.4

-2.9

1.7

0.7

3.7 5.4

-4.9

9.6

-6.2

9.6

5.9

10.8

-2.1

DR

C

Nig

eria

Ang

ola

Gab

on

Zam

bia

Cote

d Iv

oire

Bot

swan

a

Nam

ibia

Mad

agas

car

Uga

nda

Cong

o

Cha

d

Cam

eroo

n

SA

Ethi

opia

Tanz

ania

Gha

na

Sene

gal

Mau

riti

us

Rw

anda

Keny

a

Suda

n

Bur

undi

Mal

awi

Moz

ambi

que

Zim

babw

e

Sier

ra L

eone

FiscalCurrent account

USD in billions

EY - All rights reserved 201420

Gross domestic product

1 4.9% in Kenya;

2 5.5% in Uganda;

3 6.9% in Tanzania; and

4

0

2%

4%

6%

8%

10%

Rwanda

Uganda

Tanzania

Kenya

2010 2011 2012 2013 2014 2015

Eastern Africa Banking Sector: 21

Foreign Exchange Rate (to the US$)

90%

92%

94%

96%

98%

100%

102%

104%

106%

108%

110%

Uganda

Rwanda

Tanzania

Kenya

1/13/2013 2/13/2013 3/13/2013 4/13/2013 5/13/2013 6/13/2013 7/13/2013 8/13/2013 9/13/2013 10/13/2013 11/13/2013 12/13/2013

0

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Rwanda

Uganda

Tanzania

Kenya

2010 2011 2012 2013 2014 2015

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TANZANIA BANKING SECTOR OVERVIEW As at 31 December 2013, the Tanzania Banking Sector had 50 registered banks. Our report excludes one of those banks (FBME).

8 18 20 3large banks regional and small medium banks NBFIs

Eastern Africa Banking Sector: 23

Banking sector growth

17.5%.

Deposits growth was

Balance Sheet

Amounts in Tshs million 2010 2011 2012 2013

Cash and Balances with BoT 2 245 488 2 484 500 2 631 542

Balances w/other banks 1 458 686

Investment in Government and Debt Securities 2 030 413

10 211 816

Other assets 1 360 230

Total Assets 9 817 271 12 364 757 14 281 738 16 644 786 18 935 453

Customer deposits 14 411 812

Deposits from other banks

Other liabilities 408 250

Total liabilities 8 568 517 10 845 669 12 543 268 14 507 527 16 359 751

Paid up share capital 644 345

Retained Earnings

185 024

Others

Total Shareholders’ Funds 1 248 755 1 519 089 1 738 471 2 137 260 2 575 702

Total liabilities and Shareholders’ Funds 9 817 272 12 364 757 14 281 738 16 644 787 18 935 453

weaker revenue growth

EY - All rights reserved 201424

On the liabilities side, customer deposits increased 12% (13% in 2012), with shareholders’ funds up somewhat stronger, up 21% (23% in 2012).

Balance Sheet Change over 5 years

% Change 2010 2011 2012 2013

Cash and Balances with BoT 64 18 34 11 6

Balances w/other banks 31 4 -24 -20

Investment in Government and Debt Securities 11 42 38

21 23

Other Assets 31 21 16

Total Assets 19 26 16 17 14

Customer Deposits 24 25 16 13 12

Deposits from other banks -28 101 5 -6

Other liabilities -26 20 25

Total liabilities 17 27 16 16 13

Paid up share capital 31 21 23

Retained Earnings 18 13 16 11

Others 11 -4

Total Shareholder’s Funds 28 22 14 23 21

8% 21% 26%which was particularly acute

lagged asset growth by a considerable margin, rising at a CAGR of

This was despite solid Net Interest Income growth of

This is largely explained by sharply rising bad debts

Eastern Africa Banking Sector: 25

This slower growth stemmed from considerably slower interest income

Provisions for bad debts increased 44%

increase is due to bad debt written off

Fees and commissions increased somewhat slower than what net interest

considerably slower than the 25%

The increase in net income was 8%,

on the back of the sharp rises in credit impairments and the need for larger

Income Statement

% Change 2010 2011 2012 2013

Interest income 16 23 41 18

Interest expense 32 -1 14 15

11 10 25 30

Bad debt provisions and write offs 162 40 -13 44

24 35 16 13

Foreign exchange gain/loss 34 43 6 10

Fees, Commissions and other income

18 31 25 13

Other Income 26 22 -2 -30

Gross Income 10 22 24 15

16 32 23 26 15

Operating Income/(loss) before tax 1 -8 18 14

4 8

11 10 12 5

Income Statement summary over 5 years

Amounts in Tshs million 2010 2011 2012 2013

Interest income 845 300 1 036 533

Interest expense (230 005)

642 884 806 528

Bad debt provisions and write offs (104 612) (126 831) (182 854)

620 411

Foreign exchange gain/loss 145 261 153 833

Fees, Commissions and other income 300 603

Other Income 24 115 28 634

Gross Income

(860 420) (1 083 833) (1 250 562)

Operating Income/(loss) before tax 444 232

Income tax Provision (120 683)

231 024

10 865

EY - All rights reserved 201426

Tanzanian banks undoubtedly faced a tough year in 2013, driven by the need for greater

Tanzania Banking Sector (Total)

2010 2011 2012 2013

Loans and advances to total assets

ROAA

ROAE

Interest margin to average earning assets

Gross loans to deposits

Interest Income to Total Income

Interest Margin

Earning Assets to Total Assets

Total Expenses to Interest Income

income growth pushed returns weaker

Return on Average Assets and Equity

The sector’s ROAA decreased to

1.6% from 1.7% in 2012. ROAE, dropped to its lowest level in

12.5%% from

14.0% in 2012.

Eastern Africa Banking Sector: 27

continued to deteriorate

Tanzania Banking Sector (Total)

2010 2011 2012 2013

4 348 555

444 461

31 26 28

Portfolio Income per employee

Portfolio Yield

Gross Yield on Earning Assets

Deposit rates

Yield to Rate on Funds

Govt Securities as % Earning Assets

that their cost base is increasing at a faster pace than their

Regional & SmallNBFIsMediumLarge

11%13% 13% 13% 13%

15%16%16%

24%26%

16%

20%

15%17%

16%16%

19%20%

19%

11% 11% 11%13% 14%

2008 2009 2010 2011 2012 2013

EY - All rights reserved 201428

Citibank 5%

BOB, IandM, Habib

Portfolio yields remain in line with 2012 levels, with small banks enjoying the highest yields

Banks with the highest portfolio yield were:

• 32.5%

• 28.4%

• 27.7%

• 26.4%

Advans 54%

Mbinga 48%

Regional & SmallNBFIsMediumLarge

13%

2008 2009 2010 2011 2012 2013

12% 12%11% 11%

13%14%

17%

19%19%

17%

19%

15%

17%

14%

17%

19%

24%

18%

13%

11% 11%

14% 15%

The banks with the highest ratios were:

• 5.9%

• 4.3%

• 3.5%

Regional & SmallNBFIsMediumLarge

2%

2008 2009 2010 2011 2012 2013

-1% -1% -2 -2% -3% -2%1%

-5%-7%1%

-1%-1%-1%-3%1%

-1%

4%

-2%

2%

0% 1%

1%2%

Eastern Africa Banking Sector: 29

Regional & SmallNBFIsMediumLarge

40

2008 2009 2010 2011 2012 2013

16

9

13

9

3

912

-9-9

15

2

14

4

9

46

109

40

32

37

4549

Employee productivity: large banks have the most favourable ratio by a wide margin

small banks recorded negative earnings per employee for the second consecutive year due to a

Once again, there is a

the banks with regards

Citibank recorded the highest earnings per employee in 2013, at Tshs

million

• Bank of Baroda Tshs

• Bank M Tshs 73.2 million.

Citibank employees

employee than what fourth ranked Bank M does, although this is no doubt

solely corporate banking positioning

Figure 4: Earnings per employee Tsh millions

Regional & SmallNBFIsMediumLarge

8%

2008 2009 2010 2011 2012 2013

4%

2%

3%

2%

1% 1%2%

-5%-5%

3%

1%

4%

2%

3%3%3%

6%

4%

8%

6% 6%7%

6%6.4%

2.2%

By bank group, large banks lead, with a reading of

This is followed by NBFI’s with

Figure 5: Portfolio income per employee

EY - All rights reserved 201430

Portfolio Quality

Banking sector provisions for bad and doubtful debts stood at TSH 182,854 (TSH 126,831 in 2012) which account for 2% of

By comparing this to the portfolio yield, one gets a third ratio which is yield to rate on funds.

Among the peer groups provision ratios stood at:

gap between the highest and lowest cost deposits

between the highest cost of funds and the lowest cost operator, which provides the large low-

10%

0.1%

9%

0.9%

10%

0.6%

8%

0.7%

9% Advans

Maendeleo

Mbinga

NMB

BancABC

UBL

DCB

Citi

Efatha

Eastern Africa Banking Sector: 31

Asset Structure: Investments in bonds rose sharpest in 2013

Deposits increased 12% in

Capital adequacy ratio rose noticeably in 2013Capital adequacy has risen steadily since 2010, in line with banks across the globe, which are often pushed by the regulatory authorities to raise capital levels to provide a buffer against

Tanzania banking sector (total)

Financial soundness ratios % 2010 2011 2012 2013

Total Capital to RWAs

Core Capital to RWAs

Interest Margin to Gross Income

Liquid Assets to Total Assets

Liquid Assets to Deposits

Total Capital to Deposits

Capital Adequacy

Balance sheet 2012 2013 2011 2012 2013

Amounts in Tshs million % Change

Cash and Balances with BoT 2 484 500 2 631 542 34 11 6

Balances w/other banks 4 -24 -20

Investment in Government and Debt Securities

38

Loans, Advances and 10 211 816 23

Other assets 1 360 230 21 16

Total Assets 16 644 786 18 935 453 16 17 14

EY - All rights reserved 201432

Loans and advances represent 54% of total assets (up from 52%

followed by Investments in Government and Debt

2012 2013

Cash and Balances with BoT 15 14

Balances w/other banks 6

Investment in Government and Debt Securities

52 54

Other assets

Total Assets 100 100

Total assets %

2010 2011 2012 2013

Large

Medium 18 21 23 25

3 3 4 3 4

Regional and Small 1 1 2 2 2

Total Sector 100 100 100 100 100

Total assets

Tshs Million 2010 2011 2012 2013

Large 10 565 638

Medium 2 402 536 4 655 804

323 301

Regional and Small 311 561 454 886

Total Sector 9 817 271 12 364 757 14 281 738 16 644 786 18 935 453

Loans, advances and overdrafts make up the largest portion of total assets (54%) followed by

The share of total assets by medium-sized banks increased to 25% (23% in 2012 and 21% in

Regional and small banks’ share of total assets remained unchanged, at 2% in 2013% (2% in 2012 and 2011),

Eastern Africa Banking Sector: 33

Other assets

Loans, Advances &Overdrafts (NET)

Investment in Government &Debt Securities

Balances w/other banks

Cash and Balanceswith BoT

Asset Composition

11%

10%8%

15%

56%

Shareholders Funds

Other Liabilities

Deposits fromother bank

Customer Deposits

FundingComposition

76%

4%

6%

14%

Figure 6: Asset composition

Customer deposits remain the primary source of funding

Regional & SmallNBFIsMediumLarge

2012 2013

73%

2%

23%

2%3%

72%

3%

22%

Two banks dominate the deposit market, accounting for 38.8% of the total

Barclays

Citibank

Stanbic

Exim

Stan Chart

NBC

NMB

CRDB

7%

6%

4%

7%

29%

25%

13%

9%

The large banks dominate customer deposits.

EY - All rights reserved 201434

Share of customer deposits among NBFIs is provided in the chart below.

Figure 11: Share of customers deposits in small and

1%

1%

2%

2%

3%

3%

3%

3%

4%

4%

4%

5%

6%

6%

6%

7%

8%

9%

11%

12%

BOI

FNB

UBA

ICB

Akiba

Equity

BOB

Ecobank

Access

NIC

Habib

BancABC

KCB

I&M

Azania

PBZ

CBA

BOA

Bank M

DTB

TCB

Meru

Advans

Maendeleo

Mbinga

Njombe

Kagera

Efatha

Kili Coop

Mwanga

UBL

Covenant

Uchumi

TWB

Mkombozi

Amana

DCB

0.2%

0.4%

0.9%

1%

1%

1.1%

1.4%

2.1%

2.1%

2.4%

2.5%

%

3.2%

3.7%

4.5%

6.7%

16.5%

22.5%

27.9%

Twiga

TPB

TIB

13%

39%

48%

This leaves very little for the remaining banks – of which the medium sized banks share 23.2% of available deposits

Eastern Africa Banking Sector: 35

in 2013

During 2013, aggregate capital (Total Shareholders’ Funds) increased by 21%, after rising 23% in

Tshs millions 2012 2013 Change in %

Paid up share capital

Retained Earnings

Others

Total Shareholders’ Funds 2 137 260 2 575 702 22.9 20.5

Others

2012 2013

23%

74%

11%

71%

14%

19%

26%

14%

Figure 13: Change in capital structure

17%

18%

Core capital to RWAs remained at

Total capital to RWAs in 2013 remained at

Regional & SmallNBFIsMediumLarge

2012 2013

16%

31%

11%

34%

40%

17%

44%

17%

Figure 14: Total capital to RWAs

10%12%

The ratios are well above the statutory minimum

and

respectively.

EY - All rights reserved 201436

Bank liquidity was slightly lower in 2013

40%

48%

assets stood at

deposits stood at

Regional & SmallNBFIsMediumLarge

2012 2013

44%

38%

35%

40

23%

43%

37%

22%

Financial soundness can also be measured using total capital to total deposits. The sector’s average ratio remained at 16% and is well above the BOT’s statutory

Eastern Africa Banking Sector: 37

Tanzania’s banks faced slower revenue growth, despite economic growth remaining robust, in line with the

As a result, they are able to attract a large chunk of available deposits, and account for a considerable

However, their hold is gradually easing – this is particularly noticeable in their share of sector assets,

From an operational perspective, the large banks

for smaller banks to compete, as their pricing is unlikely to be as favourable as what the large banks

Even within the large bank grouping, there are

in the deposits space, two banks account for 40% of

Similarly, there are major differences between banks, depending on their core focus, even for banks

than any of its peers, and Citi is exclusively focused on

EY - All rights reserved 201438

KENYA BANKING SECTOR OVERVIEW

6 15 21Large banks Medium banks Small banks

In 2013 there were 42 banks operating in

Eastern Africa Banking Sector: 39

Sector assets grew 16%. This is in line with 2012 growth, and indicates that bank assets are growing 3 times faster than GDP.

+37%

17%

+18% +12%Balances with other banks

This in turn supported strong

Loans and advance Investments in Government and debt securities

Balance sheet (Kshs '000)

2011 2012 2013 % Change

Cash and Balances with Central Bank

Balances w/other banks

Investment in Government and Debt Securities

12

18

Other assets 23

Total Assets 2 019 777 395 2 330 059 673 2 700 507 342 16

Customer deposits 13

Deposits from other banks 124 442 355 31

Other liabilities 26

Total liabilities 1 730 775 158 1 967 877 282 2 269 324 684 15

Paid up share capital

Retained Earnings

Others

Shareholders’ Funds 431 182 658

Total liabilities and Shareholders’ Funds 2 019 777 395 2 330 059 673 2 700 507 342 16

Stable but low interest rates supported stronger loans and advances growth in Kenya than its

On the liabilities side, deposits from other banks rose strongest, up 31%, with customer deposits growth considerably slower, up

EY - All rights reserved 201440

Amounts in (Kshs 000) 2013

2011 2012 2013 % Change

Interest income 182 031 132 0

Interest expense (84 433 124) -24

164 502 855 16

Bad debt provisions and write offs (10 224 352) -4

6

Foreign exchange gain/loss -3

Fees, Commissions and other income 45 856 140 12

Other Income 12 462 865 -2

Gross Income 14

(140 421 123) 12

Operating Income/(loss) before tax 16

Income tax Provision 1

64 168 415 88 158 100

nonetheless. Interest margins remain robust, again even by emerging

during the year.

Kenya Banking Sector (Total)

2012 2013

Loans and Advances to Total Assets

ROAA

ROAE

Interest Margin on Average Earning Assets

Gross Loans to Deposits

Interest Income to Total Income

Interest Margin

Earning Assets to Total Assets

Total Expenses to Interest Income

64 168 415

All but three banks reported

Consolidated, and UBA recorded annual losses on a

Eastern Africa Banking Sector: 41

Return on average assets and equity

economies

Regional & SmallMediumLarge

2012 2013

4.2%

2.9%

1.6%

4.3%

2.9%

1.4%

Regional & SmallMediumLarge

2012 2013

27%

20%

11%

25%

20%

9%

Highest reported ROAA’s:

ROAE for 2013 was 22.2%. In line with ROAA, large banks lead in ROAE, reporting a 25.3% return, followed by medium banks with a 20.4% return.

EY - All rights reserved 201442

Regional & SmallMediumLarge

2012 2013

15%

13%

16%

12%

17%

22%2013 were:

• CFC, and Standard Chartered 10%

were:

Kenya Banking Sector (Total)

2012 2013

Loan Portfolio (Kshs 000)

Portfolio Income per employee

Portfolio Yield

Gross Yield on Earning Assets

Deposit rates

Yield to Rate on Funds

Govt Securities as % Earning Assets

Eastern Africa Banking Sector: 43

Portfolio yield

Small banks enjoy the largest portfolio yield, although the gap is narrow

Regional & SmallMediumLarge

2012 2013

16%

21%

19%18%

15%17%

Banks with the highest portfolio yield:

The banks with the highest ratios:

Regional & SmallMediumLarge

2012 2013

3% 3%

1%

4%

2%

-1%

EY - All rights reserved 201444

Deposit rates

Figure 21: Deposit rates Large banks attract funds at much lower costs than what smaller banks do

Regional & SmallMediumLarge

2012 2013

4%

5%

6%

9%

8%

3%

The graph below illustrates that large banks pay less than half the rate that small banks need to

Banks paying the highest rates were:

Banks paying the lowest deposit rates were:

0.8% of net loans.

Portfolio QualityProvisions stood at Kshs 11, 758 (12,311 million in 2012) accounting for

Eastern Africa Banking Sector: 45

Overview

Kenya banking sector (total)

Financial soundness ratios % 2012 2013

Total Capital to RWAs

Core Capital to RWAs

Interest Margin to Gross Income

Liquid Assets to Total Assets

Liquid Assets to Deposits

Total Capital to Deposits

Capital Adequacy

Asset structure overview

Balance sheet (Kshs '000)

2012 2013 Change in %

Cash and Balances with Central Bank 6

Balances w/other banks

Investment in Government and Debt Securities

22

Other assets

Total Assets 2 330 059 673 2 700 507 342 100

2013 4.2%and by global standards, Kenyan banks remain well capitalised.

this follows a benign 2012.

jump in NPL’s to again in

Capital adequacy

EY - All rights reserved 201446

Total assets %

2012 2013

Large

Medium

Regional and Small

Total Sector 100 100

Figure 22: Asset composition Loans and advances make up the major asset category – by a wide margin

other assets

Loan, advancesand Overdrafts

(NET)

Investment in governmentand Debt Securities

Balances w/ other banks

Cash and balances with central bank

AssetsComposition

22%

7%

57%

7% 7%

Eastern Africa Banking Sector: 47

(followed by core capital at 12%)

Large banks account for half of all customers deposits

OthersRetained Earnings

Paid up share capital

Other liabilities

Deposits fromother banks

Customer depositsBanks source

of Funding

72%

5%

7%

3%

9%4%

Funding (liabilities) analysis

Regional & SmallMediumLarge

2012 2013

52%

40%

10%10%

38%

50%

Financial soundness

Amount in (Kshs ‘000) 2012 2013 Change in %

Paid up share capital 20

Retained Earnings 54

Others 26

Total Shareholders’ Funds 431 182 658 100

16% 18% (22% in 2012) (25% in 2012)

Core capital to RWAs stood at Total capital to RWAs was

EY - All rights reserved 201448

Figure 25: Total capital to RWAs

Liquidity analysis

Regional & SmallMediumLarge

2012 2013

25%

17%

23%

25%24%

18%

Regional & SmallMediumLarge

2012 2013

35%

38%39%

41%40%

34%

Financial soundness is also measured by total capital

The average ratio was

Three Banks with the lowest ratios were:

Eastern Africa Banking Sector: 49

Kenyan banks – like their peer banks across the KURT region, can largely be assessed by the size of

from scale economies, have greater reach across more business lines and product markets, and hence

Kenyan banks are growing at three times the rate

the region, and could be at least partly due to the

played, incorporating growing numbers of adults into

However, small banks recorded an overall rise in

gains, moving considerably closer to their medium and

sometimes paying less than half of what smaller and medium sized banks need to pay in order to attract

EY - All rights reserved 201450

UGANDA BANKING SECTOR OVERVIEW

8 6 11Large banks Medium banks Small banks

In 2013 there were 25 banks operating in Uganda, made up of:

Eastern Africa Banking Sector: 51

Balance Sheet

2012 2013 % increase

Amounts in Ush million

Central Bank balance 4

Balances w/other banks 1 062 116

Investment in Government and Debt Securities

3 060 368

5

Other assets 1 332 382 1 559 533 17

Total Assets 15 327 614 17 256 139 13

Customer deposits 10 468 099 11 375 778 9

Deposits from other banks 469 456 650 612 39

Other liabilities 1 699 676 2 362 004 39

Total liabilities 12 637 230 14 388 395 14

Paid up share capital 982 569 1 235 708 26

Retained Earnings 1 298 918 1 317 585 1

-159 168 -124 944 +22

Others 568 064 439 395 -23

Shareholders’ Funds 2 690 383 2 867 744 7

Total Shareholder’s Funds 15 327 614 17 256 139 13

EY - All rights reserved 201452

Income Statement summary over 2 years

Amounts in Ush million 2012 2013 % change

Interest income 2 006 243 -5

Interest expense (551 410)

1 413 253 -5

Bad debt provisions and written offs (205 533) -11

11

Foreign exchange gain/loss 184 554 115 752 -37

Fees, Commissions and other income 370 628 387 198 4

Other Income 22 642 140 446 520

Gross Income 1 785 545 1 808 332 1

Non-interest expense (1 055 628) (1 214 168) 15

Operating Income/(loss) before tax 729 917 594 164 -19

Income tax Provision (152 994) (25 232) -84

Net Income after Income Tax 545 712 423 896 -22

sharply in the 2nd half of 2012, the impact was acutely felt across the banking sector in 2013, with

Driven by the modest growth in Loans and advances, and a benign interest rate environment,

a considerable decrease in net income, of 22%

Eastern Africa Banking Sector: 53

Uganda banking sector (total)

2012 2013

Loans and Advances to Total Assets

ROAA

ROAE

Interest Margin to Average Earning Assets

Non-Interest Expense to Gross Income 40.9 47.8

Gross Loans to Deposits 72.6 69.9

Interest Income to Total Income 77.6 74.7

Interest Margin 70.4 71.0

Earning Assets to Total Assets 76.6 77.6

Net Interest Margin 21.7 17.3

Total Expenses to Interest Income 82.2 93.0

30% 46.1% 77.6%Nearly Loans and advances account for

just under half of total assets Earning assets to total assets stood at

a slight increase from 2012. of Ugandan banks recorded losses in 2013

Of the 25 registered banks in Uganda

in 2013, while 7 banks reported losses, namely; BOA, Ecobank, Fina, GTB, Imperial, Orient, and UBA.

EY - All rights reserved 201454

Large banks feel the least pressure from the lower interest rates

SmallMediumLarge

2012 2013

5%

1%-2%-3%%

2%

4%

SmallMediumLarge

2012 2013

30%

3%-10%-13%

13%

22%

Banks reporting the highest ROAA’s:

The sector achieved an overall

and for the same reasons cited above, large banks reported considerably higher ROAE’s than what medium

Uganda banking sector (total)

2012 2013

Loan Portfolio (UGshs Million)

Staff Income to Portfolio

Portfolio Yield

Gross Yield on Earning Assets

Deposit rates 5.2 4.5

4.1 1.4

Yield to Rate on Funds 18.0 15.0

Govt Securities as % Earning Assets 26.1 26.8

Eastern Africa Banking Sector: 55

economies of scale

Portfolio yields shrunk for both large and small banks during 2013

interest income (%) loans and advances portfolios

levels, driven by the above cited declining interest rates which took effect in the latter half of 2012,

SmallMediumLarge

2012 2013

18% 18%

21%

29%

19%18%

SmallMediumLarge

2012 2013

25%

18%16%

21%19% 20%

2013 were:

• BOI 11%

• Citibank and DTB 12%

Banks with the highest portfolio yield were:

• GTB 46%

• FTB 38%

EY - All rights reserved 201456

Deposit rates: there is a considerable gap between the highest and least cost deposits

countries, customer deposits make up the bulk of borrowed funds

The banks with the highest ratios were:

In terms of bank

banks reported a strong

reported a marginally positive ratio and small banks a

SmallMediumLarge

2012 2013

7%

1%-6%-8%-1%

3%

11%

1.8%

11%

2.1%

Fina and HFB

Stanbic

DTB

Citibank and Barclays

require stronger provisions into 2014

Provisions for bad and doubtful debts stood at Ush 182,3bn

Eastern Africa Banking Sector: 57

Capital adequacy ratios were lower than 2012’s but remain healthy

Uganda banking sector (total)

Financial soundness ratios % 2012 2013

Total Capital to RWAs

Core Capital to RWAs

Interest Margin to Gross Income

Liquid Assets to Total Assets

56.3 63.8

Total Capital to Deposits 23.7 23.6

17.6 16.6

Asset structure: bank assets are used primarily for lending and purchasing bonds

9%Other assets

14%Cash and Balances

with central bank

10%Balances w/other banks

21%Investment in Government

& Debt Securities

46%Loans, Advances & Overdrafts (NET)

Total Assets by asset class

EY - All rights reserved 201458

Large banks dominate the banking market, as they do across most countries, with their share of

Funding (liabilities) structure: deposits’ share of total assets fell two percentage points

Balance sheet

Ush millions 2012 2013

Customer deposits

Deposits from other banks 650 612

Other liabilities 2 362 004

Paid up share capital

Retained Earnings

Others 568 064

Total liabilities and Shareholders’ Funds

SmallMediumLarge

2012 2013

76%

19%

8%6%

18%

73%

66%

12%Customer deposits accounted for the bulk of funds

Total funding stood at Ush 17,256 billion in 2013, a increase of

Eastern Africa Banking Sector: 59

Large banks attract in excess of 70% of total deposits

shareholder fund growth

Balance sheet

Ush millions 2012 2013

Paid up share capital

Retained Earnings

Other 568 064

Total Shareholders’ Funds

SmallMediumLarge

2012 2013

76%

19%

8%6%

18%

73%

7% 26%During 2013, aggregate capital (Total Shareholders’ Funds) increased by

In relation to Risk Weighted Assets (RWAs), the sector average for core capital to RWAs was

EY - All rights reserved 201460

Small banks hold proportionally greater capital levels

Liquidity analysis: small banks are more liquid than their larger peers

SmallMediumLarge

2012 2013

28%

21%

44%44%

21%

30%

64% deposits ratio stood at

SmallMediumLarge

2012 2013

44%

36%

50

40%

34%

47%

Eastern Africa Banking Sector: 61

in that interest rates remained at very low levels – by

The challenging operating environment in turn

greater attention, going forward, to operating in a

more or less steady – at historical low levels and there

There was a strong uptick in non-performing loans

Uganda’s banks were squeezed hard to improve capital adequacy in 2013, and the CAR was lower than 2012’s

EY - All rights reserved 201462

RWANDA BANKING SECTOR OVERVIEW

5 4 1Large banks Medium banks Small bank

In 2013 there were 10 banks operating in Rwanda, made up of:

Eastern Africa Banking Sector: 63

Growth in assets stemmed mainly from balances with banks, up 93% and investment in government and debt securities, up 66%.

Balance Sheet

Amounts in Rwf millions 2012 2013 % Change

Cash and Balances with central bank

Balances w/other banks

Investment in Government and Debt Securities

148 426 66

35

Other assets -66

Total Assets 1 164 672 1 305 390 12

Customer deposits 10

Deposits from other banks 13 116 -52

Other liabilities

Total liabilities 975 402 1 086 897 11

Paid up share capital 5

Retained Earnings 21 848 458

158

Others 86 625

Shareholders’ Funds 189 270 218 493 15

Total Shareholders’ Funds and liabilities 1 164 672 1 305 390 12

On the liabilities side, customer deposits increased slightly slower than asset growth, at 10%, while

EY - All rights reserved 201464

Income Statement Items Snapshot

Amounts in Rwf million 2012 2013 % Change

Interest income 100 031

Interest expense 40

-23

Bad debt provisions and write offs -3 331 -54

54 553 38 018 -30

Foreign exchange gain/loss

Fees, Commissions and other income -28

Other Income 5 315 -56

Gross Income 128 583 -24

-24

Operating Income/(loss) before tax 33 351 25 063 -25

Income tax Provision -1 683

25 200 14 800 -41

Coupled with this sharply slower interest income, non-interest revenue also experienced a sharp

Eastern Africa Banking Sector: 65

2012 2013

Loans and Advances to Total Assets

ROAA

ROAE

Interest Margin to Average Earning Assets

Gross Loans to Deposits

Interest Income to Total Income

Interest Margin

Earning Assets to Total Assets

Total Expenses to Interest Income

EY - All rights reserved 201466

SmallMediumLarge

2012 2013

3%

1%

5%

-4%

2%

1%

SmallMediumLarge

2012 2013

17%

6%

27%

-15

13%

7%

Tanzania Banking Sector (Total)

2012 2013

Loan Portfolio (RWF million)

Portfolio Income per employee

Portfolio Yield

Gross Yield on Earning Assets

Deposit rates 3.1 3.9

-2.2 -1.0

Yield to Rate on Funds 13.8 7.0

Govt Securities as % Earning Assets 12.2 13.9

4.9%

3.8%

2.7%

High performing banks on ROAA are Zigama

IandM

Access

ROAE for 2013 was 7.3% (14.2% in 2012)

Eastern Africa Banking Sector: 67

the sector were:

SmallMediumLarge

2012 2013

20%17%

54%

36%

17%

7%

Portfolio yield: unlike other markets, smaller banks in

Small banks have the highest portfolio yield

SmallMediumLarge

2012 2013

19%

15%

50%

22%

14%

7%Banks with the highest portfolio yield:

EY - All rights reserved 201468

The banks with the highest ratios:

In terms of peer groups, all showed a negative portfolio

SmallMediumLarge

2012 2013

-1% -2% -4%-14%-2% 0%

Deposit rates

deposit cost banks, as illustrated below:

8.7%

1.0%

5.9% 5.6%

1.8% 2.8%BOK

GTB KCB

Access

The least expensive deposits:

Portfolio quality: bad debts remain low

Provision for bad and doubtful debts stood at Rwf 3 331,

Eastern Africa Banking Sector: 69

noticeably in 2013

Tanzania banking sector (total)

Financial soundness ratios % 2012 2013

Total Capital to RWAs

Core Capital to RWAs

Interest Margin to Gross Income

Liquid Assets to Total Assets

Liquid Assets to Deposits

Total Capital to Deposits

Capital Adequacy

Asset structure: loans as a portion of total assets rose sharply during the year

Balances sheet structure % 2012 2013

Cash and Balances with central bank 10 10

Balances w/other banks 15

Investment in Government and Debt Securities 8 11

46 56

Other assets 8

Total Assets 100 100

Total Assets % 2012 2013

Large

Medium

Small

Total Sector 100 100

EY - All rights reserved 201470

Figure 42: Asset composition

Funding (liabilities) structure: customer deposits form the bulk of deposits

Balance Sheet

Rwf millions 2012 2013 %

Customer deposits

Deposits from other banks 13 116

Other liabilities

Paid up share capital

Retained Earnings 21 848

158

Others 86 625

Total Shareholders’ Funds

Other assets

Loans, Advances &Overdrafts (NET)

Investment in Government &Debt Securities

Balances w/other banks

Cash and Balanceswith BoT

Asset Composition

11%

10%8%

15%

56%

66%67%

Total funding remains strongly reliant on customer deposits, in line with other KURT countries, making up

of total funds (slightly down from

in 2012)

Eastern Africa Banking Sector: 71

SmallMediumLarge

2012 2013

68%

33%

4%3%

29%

63%

Figure 43: Funding composition

Large banks dominate the deposits market

Customer deposits

Retained Earnings

OtherLiabilities

Paid upshare capital

Retained EarningsOthers

FundingComposition

8%

66%

1%

16%

7%2%

EY - All rights reserved 201472

SmallMediumLarge

2012 2013

20%

25%

20%

27%

24%25%

SmallMediumLarge

2012 2013

26%

31%

27%

22%

28%

39%

Financial soundness

Liquidity rose sharply in 2013

The banking sector’s liquidity rose sharply, with liquid-to-total-

liquid-assets-to-deposits ratio was similarly much higher, at 48% (35% in 2012)

By bank type, there was a noticeable difference between the bank types in 2013, with large banks being the most liquid, and

22% 25%Core capital to RWAs stood at

(19% in 2012) (22% in 2012)

Total capital to RWAs

Furthermore,

has also been measured using capital to deposits. The sector’s average ratio was marginally up at 22.6% (21.8%.)

to total assets

Figure 45: Total capital to RWAs

Eastern Africa Banking Sector: 73

Rwanda’s banking sector differs from that of its neighbouring markets in that the smaller banks are

larger banks are not as dominant, holding just under

2013 was a tough year for the sector, with slow

Asset growth slowed in 2013, but nevertheless

EY - All rights reserved 201474

KURT BANKING SECTOR ANALYSIS

49 42 25 10Tanzania Kenya Uganda Rwanda

There are a total of 126 banks covered in this KURT banking

three times larger than Tanzania’s, the latter nevertheless leads by numbers:

Eastern Africa Banking Sector: 75

Strong economic growth supports asset growth, but falling

Total KURT banking sector assets amount to US$ 52 billion, with Kenya holding the largest

Total assets billion USD 2012 2013 % Change

Kenya 31 288 464 16

Uganda 6 826 112 20

Rwanda 4

Tanzania 13

Total 45 230 613 15

Kenya

Tanzania

Uganda

Rwanda

27%

11%

6%

1%

EY - All rights reserved 201476

Loans and advances to total assets

Kenya has the highest Loans and Advances to Total Assets ratio, indicating that a greater portion of

KURT Banking Sector

Kenya Uganda Rwanda Tanzania Average

Portfolio Yield

Gross Yield on Earning Assets

Yield to deposit rate

• Uganda’s banks also feature the highest Gross yield on earning assets

• Tanzanian banks pay the lowest deposit rates

Uganda

Tanzania

Rwanda

Kenya

46%

54%

56%

57%

Eastern Africa Banking Sector: 77

Kenya’s banks are able to deploy a greater proportion of their assets to lending, as a result of which,

contend with low and declining interest rates, but were able to absorb the impact of lower interest

KURT Banking Sector

Kenya Uganda Rwanda Tanzania Average

Loans and Advances to Total Assets

Income

ROAA

ROAE

Interest Margin to Average Earning Assets

Income

Gross Loans to Deposits

Interest Income to Total Income

Interest Margin

Earning Assets to Total Assets

Total Expenses to Interest Income

EY - All rights reserved 201478

Figure 49: ROAA Kenya’s banks earned the highest returns in the region

Financial soundness

KURT Banking Sector

Financial soundness ratios % Kenya Uganda Rwanda Tanzania Average

Total Capital to RWAs

Core Capital to RWAs

Gross Interest Margin

Liquid Assets to Total Assets

Liquid Assets to Deposits

Total Capital to Deposits

Capital Adequacy

Rwanda

Tanzania

Uganda

Kenya

1.2

1.6

2.6

3.5

Eastern Africa Banking Sector: 79

Whilst Rwandan banks are the best capitalized, that comes at

assets deployed to earning productive returns – in the form of

Their small size also limits the Rwandan banking sector’s

the largest economy of the four countries, has the most mature banking market in the region, and is able to absorb

result, Kenya remained the most lucrative banking market in

However, growth opportunities remain sizeable in all four

to GDP, Rwanda undoubtedly has the most opportunity to extend the reach of banking products and services across its population, given that there is only 13 US cents of bank

Kenya

Tanzania

Uganda

Rwanda

Market maturity bank assets to GDP

0.133

0.233

0.342

0.612

EY - All rights reserved 201480

BoT Bank of Tanzania

BoU Bank of Uganda

CBK Central Bank of Kenya

CRB Credit Reference Bureau

Govt Government

Kshs Kenyan Shillings

PandL

ROAA Return on Average Assets

ROAE Return on Average Earnings

RWA Risk Weighted Assets

Rwf Rwandese Franc

Tshs Tanzanian Shillings

Ushs Ugandan Shillings

following is the full list with their abbreviations used:

Tanzania

1 Access Access Bank (T) Limited

2 Advans Advans Bank (T) Limited

3 Akiba Akiba Commercial Bank Limited

4 Amana Amana Bank Ltd

5 Azania Azania Bank Ltd

6 BancABC African Banking Corporation (T) Ltd

Bank M Bank M (T) Limited

8 Barclays Barclays Bank (T) Limited

BOA BOA Bank (T) Limited

10 BOB Bank of Baroda (T) Limited

11 BOI Bank of India (T) Limited

12 CBA Commercial Bank of Africa td

13 Citibank Citibank (T) Limited

14 Covenant Covenant Bank for Women (T) Ltd

15 CRDB CRDB Bank PLC

16 DCB Dar es Salaam Community Bank

DTB Diamond Trust Bank (T) Limited

18 Ecobank Ecobank (T) Limited

Efatha Efatha Bank

Eastern Africa Banking Sector: 81

20 Equity Equity Bank Tanzania Ltimited

21 Exim Exim Bank (T) Limited

22

23 Habib Habib African Bank Limited

24 IandM IandM Bank (T) Limited

25 ICB International Commercial Bank (T) Limited

26 Kagera Kagera Farmers Co-operative Bank Ltd

KCB Kenya Commercial Bank (T) Limited

28 Kili Coop Kilimanjaro Co-operative Bank

Maendeleo Maendeleo Bank PLC

30 Mbinga Mbinga Community Bank Ltd

31 Meru Meru Community Bank

32 Mkombozi Mkombozi Commercial Bank PLC

33

34 Mwanga Mwanga Rural Community Bank Ltd

35

36

38

40 Stan Chart Standard Chartered Bank (T) Limited

41 Stanbic Stanbic Bank (T) Limited

42 TCB Tandahimba Community Bank

43 TIB Tanzania Investment Bank Ltd

44 TPB Tanzania Postal Bank Ltd

45 TWB Tanzania Women’s Bank Plc

46 Twiga Twiga Bancorp Limited

UBA United Bank for Africa (T) Limited

48 UBL United Bank Limited (T) Limited

Uchumi Uchumi Commercial Bank Ltd

Kenya

1 ABC African Banking Corporation Limited

2 Barclays Barclays Bank of Kenya

3 BOA Bank of Africa Kenya Limited

4 BOB Bank of Baroda (K) Limited

5 BOI Bank of India

6 CBA Commercial Bank of Africa

CfC CfC Stanbic Bank Limited

8 Chase Chase Bank (K) limited

Citibank

EY - All rights reserved 201482

10 Co - op Co-operative Bank of Kenya Limited

11 Consolidated Consolidated Bank of Kenya Limited

12 Credit Credit Bank Limited

13 DBK Development Bank of Kenya Limited

14 DTB Diamond Trust Bank (K) Limited

15 Ecobank Ecobank Kenya Limited

16 Equatorial Equatorial Commercial Bank Limited

Equity Equity Bank Limited

18 Family Family Bank

Fidelity Fidelity Commercial Bank Limited

20 Fina Fina Bank Limited

21 First First Community Bank Limited

22 Giro Giro Commercial Bank Limited

23 Guardian Guardian Bank Limited

24 Gulf Gulf African Bank Limited

25 Habib Habib Bank Limited

26 Habib AG

Housing Housing Finance Company Limited

28 IandM IandM Bank Limited

Imperial Imperial Bank Limited

30 Jamii Jamii Bora Bank Limited

31 KCB Kenya Commercial Bank

32 K-Rep K-Rep Bank Limited

33 Middle Middle East Bank Limited

34

35

36 Oriental Oriental Commercial Bank Limited

Paramount Paramount Universal Bank Limited

38 Prime Prime Bank Limited

STD Standard Chartered Bank (K) Limited

40 Trans

41 UBA UBA Kenya Bank Limited

42 Victoria Victoria Commercial Bank Limited

Uganda

1 ABC ABC Capital Bank Limited

2 Barclays Barclays Bank Uganda Limited

3 BOA Bank of Africa - Uganda Limited

4 BOB Bank of Baroda

5 BOI Bank of India (Uganda)

Eastern Africa Banking Sector: 83

6 Cantenary Centenary Rural Development Bank Limited

CBA Commercial Bank of Africa (U) Limited

8 CIB Cairo International Bank Limited

Citibank Citibank Uganda Limited

10 Crane Crane Bank Limited

11 DFCU DFCU Bank Limited

12 Diamond Diamond Trust Bank Uganda Limited

13 Ecobank Ecobank Uganda Limited

14 Equity Equity Bank Uganda Limited

15 Fina Fina Bank Uganda Limited

16 FTB Finance Trust Bank Limited

GTB Global Trust Bank Limited

18 HFB Housing Finance Bank

IBU Imperial Bank Uganda Limited

20 KCB KCB Bank Uganda Limited

21

22 Orient Orient Bank Limited

23 Stan Chart Standard Chartered Bank Uganda Limited

24 Stanbic Stanbic Bank Uganda Limited

25 Tropical Tropical Bank Limited

26 UBA United Bank for Africa (Uganda) Limited

Rwanda

1 Access Access Bank Rwanda Ltd

2 BOK Bank of Kigali Ltd

3 BPR Banque Populaire du Rwanda

4 BRD Banque Rwandaise de developpement

5 Cogebanque Cogebanque Ltd

6 Ecobank Ecobank Rwanda Ltd

Equity Equity Bank Rwanda

8 GTB Guaranty Trust Bank Rwanda Ltd

IandM IandM Bank Ltd

10 KCBR Kenya Commercial Bank Rwanda

11

EY - All rights reserved 201484

increase/decrease in loan portfolio over the period under

• again theoretically, how much each staff has contributed to the bank’s earnings

show how much each staff has contributed on average to the

higher ratio has more productive staff

be at least equal to (and preferably better than) the bank’s

from non-lending sources)

• Assets: Shows the gross interest income earned from all

• Basically this gives the average deposit interest rate paid by

may include interest on other borrowed funds)

• the Portfolio Yield (6) minus the result of the Operating

• extent Earning Assets are made up of Government Securities (as opposed, for example, to loans and advances)

• as a % of total assets

• the returns generated by the bank’s assets

• show the return to Shareholders from the bank’s operations

• much non-interest expense would ‘eat’ into interest income especially if interest income was the bank’s only income

main source of income to cover other major (non-interest) expenses

• to which non-interest expense would ‘eat’ into total income

• which interest income is the bank’s major source of income (as it should be)

bank’s interest policy

• of the bank’s assets and if most of them are earning assets

earning assets

earned by the bank on its loans and advances

• to which the bank’s interest income covers total expenses if, hypothetically, assuming that interest income was the bank’s only source of income

bank’s net interest earnings made up total earnings

The following ratios were used in the supplement:

Eastern Africa Banking Sector: 85

Financial soundness ratios

better managed the portfolio

• Exposures (%): Shows the degree to which creditors are

• from total capital on all the bank’s Deposits

the review may be limited by the level of detail of information

the ratios:

account

• Total Capital = Total shareholder’s funds

• Off Balance Sheet Exposures = Contingent liabilities

a percentage of the total capital of a bank, which is also

assets*100

short maturity period (less price sensitive to interest rate

of bank assets are cash, reserves, securities (Government

EY - All rights reserved 201486

EY AFRICA

However, like all the large professional services organizations,

country (and even city) practices ran independently, were

often disconnected and had different capability and service-

on a structured process of integrating all of its Sub-Saharan

Eastern Africa Banking Sector: 87

EY STRATEGIC GROWTH FORUM™

Africa 2014: realizing the possibilities

South Africa

This will be the third Strategic Growth Forum (SGF) hosted on

on the strategic growth opportunities that the continent offers and the challenges that need to be addressed to

previous editions, SGF Africa has established a reputation as an unparalleled opportunity to network, share ideas and challenges, and learn from those who are doing business and

Among the key topics that will be explored this year:• Africa 2030

• Building capabilities for growth in Africa

• Realizing Africa’s human potential

• The future of infrastructure in Africa

• Innovation

• Financing Africa’s growth and development

• African success stories

more information on the venue, accommodation, registration

Today, we are able to navigate through the complexity that our

Its sole purpose is to help clients make their investment and

clients through:

• across Africa and the rest of the world, enabling us to coordinate our resources to provide clients with a single point of contact

• Pre-eminent thought leadership and events such as the Africa attractiveness survey, the Strategic Growth Forum Africa and the Africa Tax Conference

• — an interactive map-based tool that visually maps data through the lens of the continent’s geography

• A proven methodology for supporting the development of growth strategies for Africa

EY AFRICA

EY - All rights reserved 201488

Country Name Email

Algeria Philippe Mongin [email protected]

Angola

Botswana Bakani Ndwapi [email protected]

Cameroon Joseph Pagop [email protected]

Chad Joseph Pagop [email protected]

Congo Ludovic Ngatse [email protected]

Cote d'Ivoire Jean-Francois Albrecht [email protected]

DRC Lindsey Domingo [email protected]

Egypt Emad Ragheb [email protected]

Erik Watremez [email protected]

Ethiopia Zemedeneh Negatu [email protected]

Gabon Erik Watremez [email protected]

Ghana Ferdinand Gunn [email protected]

Guinea Conakry Rene-Marie Kadouno [email protected]

Kenya Gitahi Gachahi [email protected]

Libya Waddah Barkawi [email protected]

Madagascar Gerald Lincoln [email protected]

Malawi Shiraz Yusuf [email protected]

Morocco El Bachir Tazi [email protected]

Mauritius Gerald Lincoln [email protected]

Namibia Gerhard Fourie [email protected]

Nigeria Henry Egbiki [email protected]

Rwanda Allan Gichuhi [email protected]

Senegal Makha Sy [email protected]

Seychelles Gerald Lincoln [email protected]

South Africa Ajen Sita [email protected]

South Sudan Patrick Kamau [email protected]

Tanzania Joseph Sheffu [email protected]

Tunisia Noureddine Hajji [email protected]

Uganda Muhammed Ssempijja [email protected]

Zambia Tim Rutherford [email protected]

Zimbabwe Walter Mupanguri [email protected]

Eastern Africa Banking Sector: 89

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doing, we play a critical role in building a better working world for our people,

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate

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