– spanning the period 2009-2016
Today I bring into focus three major commercial banks out of the six that operate within the industry. Ideally, however, I would have liked to analyse all six individually, but I was restricted to three because the financial information for the period under review was not readily available in the public’s domain. Nonetheless, despite this limitation, today’s presentation sought to provide some meaningful insights with respect to the performance of the banking system within the framework of a comparative analysis conducted for three major commercial banks within the last seven years.
Discussion and analysis
Measuring the size of each bank in terms of its asset base, Republic Bank accounts for 32.4 per cent of total commercial banks’ assets; GBTI accounts for 21 per cent, and Citizens Bank accounts for 10.7 per cent of total commercial banks’ assets.
Republic Bank
From the data presented above, we have observed that RBL’s total assets grew by 69 per cent, from $89.3 billion in 2009 to $151.6 billion in 2016. Reserve and retained earnings grew by 903.5 per cent, from $1.6 billion in 2009 to $16 billion in 2016. Loans & advances grew by 150.6 per cent, from $23.3 billion in 2009 to $58.4 billion in 2016. Non-performing loans grew by 1,657 per cent, from $436 million in 2009 to $3.56 billion in 2016; and profit after tax grew by 48.46 per cent, from $1.8 billion in 2009 to $2.7 billion in 2016.
GBTI
GBTI’s total assets grew by 82.6 per cent, from $54 billion in 2009 to $98.4 billion in 2016. Reserve and retained earnings grew by 183 per cent, from $4.9 billion in 2009 to $13.7 billion in 2016. Loans & advances grew by 248 per cent, from $13 billion in 2009 to $45.5 billion in 2016. Non-performing loans grew by 726 per cent, from $1.4 billion in 2009 to $11.8 billion in 2016; and profit after tax grew by 106.15 per cent, from $1.0 billion in 2009 to $2.043 billion in 2016.
CBI
CBI’s total assets grew by 140 per cent, from $21 billion in 2009 to $50.2 billion in 2016. Reserve and retained earnings grew by 236 per cent, from $1.7 billion in 2009 to $5.6 billion in 2016. Loans & advances grew by 179 per cent, from $10.4 billion in 2009 to $29.2 billion in 2016. Non-performing loans grew by 1,150 per cent, from $613 million in 2009 to $7.7 billion in 2016; and profit after tax grew by 22.5 per cent, from $391 million in 2009 to $479 million in 2016.
Conclusion
Having examined key financial indicators of the three commercial banks, one bank – namely, Republic Bank — stood out in regard to its management engaging in prudent financial management of the institution; and by extension, given the nature of banking, prudent lending practices as well. This notion is supported by the fact that – when you look at the data — despite GBTI’s total assets would have grown by 82.6 % and RBL’s by 69%, RBL remained much more highly capitalised and sounder than GBTI, given that RBL’s reserve grew by 903.5 per cent while GBTI’s grew by 183%. Albeit, RBL’s non-performing portfolio remained relatively low, at $3.5 billion in 2016, when compared to its growth from 2009 by some 1,657%. This suggests that the bank took a slightly more relaxed approach to lending during the period under review. But this outcome could also be attributed to the deteriorating performance within the macroeconomic environment.
Looking at GBTI and CBI, on the other hand, though their NPLs grew at a lower rate than RBL’s, they both account for a larger portion of the NPLs relative to the size of their total loans and advances’ portfolio. This outcome could be explained by two reasons: the first is evidenced by reckless lending or excessive risk-taking, and thereby weakening the financial soundness of both institutions from a liquidity and capital base standpoint.
Finally, correlating the banking sector’s performance to that of the macroeconomic environment, in 2009, the economy was characterised as a more robust economy, experiencing progressive growth in key economic sectors. The confidence level was much higher when compared to 2016, a period characterised, from all indicators, as an undeforming economy.
