Bank reserves hit record Ksh.307 billion

Local banks stored a record Ksh307 billion as reserves in August, the highest cushion ever by the industry according to publicly available data from the Central Bank of Kenya (CBK).

This from a lower cover of Ksh.265.4 billion in July 2022.

The higher reserves by lenders is despite the CBK maintaining a lower cushion requirement with the cash reserve ratio set at 4.25 per cent since March 2020 with the view of supporting private sector credit growth during the stay of the COVID-19 pandemic.

Commercial banks in Kenya are required to keep a specified proportion of their total deposits at the CBK with the reserve bank adjusting the minimum requirement to influence money supply in the economy.

The cushion which is based on banks’ total domestic and foreign currency deposit liabilities is used to facilitate commercial banks’ liquidity management.

The stretch in bank reserves aligns largely to improved profitability for the industry with the better sector operating metrics allowing lenders to increase the cushion.

According to additional data from the CBK, profit before tax for the sector rose to Ksh.163.3 billion in August 2022 compared to Ksh.127.8 billion at the same time last year.

Commercial banks have been tipped to nearly double their earnings again this year from a pre-tax profit of Ksh.194.8 billion in 2021.

Banks operating metrics have remained above CBK’s statutory requirement with the average liquidity ratio for instance standing at 51.6 percent in August.

The industry’s total assets currently stand at Ksh.6.4 trillion to include Ksh.3.6 trillion in gross loans to customers.

Banks meanwhile hold Ksh.4.6 trillion in gross customer deposits.