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Law Capping interest rates
Rank: Elder Joined: 10/1/2009 Posts: 2,436
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KulaRaha wrote:obiero wrote:KulaRaha wrote:At 12.9% kcb and co are doomed. What forms the basis of your judgement. Kenyan banks could lend at 5% and still make a profit.. It all depends on cost of funds.. Recalibration of the accounts that qualify for the minimum of 70% on CBR shall determine which bank thrives.. COOP via the SACCO movement remains the best bet to ride this wave With a gross spread of 6% and npls higher, how will they earn a profit? Hapo sasa. Declining yields (from both gilts and lending) and rising cost of funds major challenge for banks. Banks must boost non-interest income and increase lending volumes to make up for the profit shrinkage. The lower their tier the more they have to work harder.
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Rank: Elder Joined: 10/1/2009 Posts: 2,436
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Plimsoul wrote:Irony of using KBRR is that because it's lower, banks move to lending to govt. So tbills drop, and because tbills make up KBRR, KBRR drops further. CBK wont even have to change CBR.
Interesting times ahead.
Interesting, hadnt looked at it this way. Reminds me of a circular reference, with cause leading to effect & effect leading to cause. So its obvious our rates will depend mostly on domestic gava spending by jubiree/ exchange rate stability...
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Rank: Member Joined: 8/17/2007 Posts: 294
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Intelligentsia wrote:Plimsoul wrote:Irony of using KBRR is that because it's lower, banks move to lending to govt. So tbills drop, and because tbills make up KBRR, KBRR drops further. CBK wont even have to change CBR.
Interesting times ahead.
Interesting, hadnt looked at it this way. Reminds me of a circular reference, with cause leading to effect & effect leading to cause. So its obvious our rates will depend mostly on domestic gava spending by jubiree/ exchange rate stability... what banks are more scared about is having to pay 7% interest on deposits they get for free currently
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Rank: Veteran Joined: 6/23/2011 Posts: 1,740 Location: Nairobi
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Let's as agree keeping your money at the bank is not creating any value and the banks loans need to be cheap for those who create value e.g. manufacturing,real estate to prosper.
For this to happen we must all sacrifice.
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Rank: Elder Joined: 9/29/2006 Posts: 2,570
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Have CBA revised interest on MSHWARI? What about interest on KCB-MPESA loans? The opposite of courage is not cowardice, it's conformity.
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Rank: Veteran Joined: 11/13/2015 Posts: 1,658
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KulaRaha wrote:obiero wrote:KulaRaha wrote:At 12.9% kcb and co are doomed. What forms the basis of your judgement. Kenyan banks could lend at 5% and still make a profit.. It all depends on cost of funds.. Recalibration of the accounts that qualify for the minimum of 70% on CBR shall determine which bank thrives.. COOP via the SACCO movement remains the best bet to ride this wave With a gross spread of 6% and npls higher, how will they earn a profit? The aim is to maintain the market share so for a while the profit motive takes a chill. I would bet Equity would come at 12% and effectively wipe out the Sacco movement's value proposition. Why would anyone borrow their own money at 12% when you can get it from the bank? I would expect Sacco deposits will shrink so Coop would the worst bus
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Rank: User Joined: 8/15/2013 Posts: 13,237 Location: Vacuum
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Plimsoul wrote:Irony of using KBRR is that because it's lower, banks move to lending to govt. So tbills drop, and because tbills make up KBRR, KBRR drops further. CBK wont even have to change CBR.
Interesting times ahead.
I do no think so, govt domestic borrowing currently stands less than 450B per year as compared to bank totla loan book of 1.2 Trillion and assets of 2.4 Trillion. Hence govt borrowing makes up a small percentage of the banks loan book, if the returns on T Bills are negligible, banks will simply stop buying them. If Obiero did it, Who Am I?
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Rank: Elder Joined: 9/29/2006 Posts: 2,570
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wukan wrote:KulaRaha wrote:obiero wrote:KulaRaha wrote:At 12.9% kcb and co are doomed. What forms the basis of your judgement. Kenyan banks could lend at 5% and still make a profit.. It all depends on cost of funds.. Recalibration of the accounts that qualify for the minimum of 70% on CBR shall determine which bank thrives.. COOP via the SACCO movement remains the best bet to ride this wave With a gross spread of 6% and npls higher, how will they earn a profit? The aim is to maintain the market share so for a while the profit motive takes a chill. I would bet Equity would come at 12% and effectively wipe out the Sacco movement's value proposition. Why would anyone borrow their own money at 12% when you can get it from the bank? I would expect Sacco deposits will shrink so Coop would the worst bus So it means SACCOs are likely to become irrelevant if banks can lend Wanjiku without security at these low interest rates?? The opposite of courage is not cowardice, it's conformity.
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Rank: Elder Joined: 3/2/2009 Posts: 26,331 Location: Masada
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jerry wrote:wukan wrote:KulaRaha wrote:obiero wrote:KulaRaha wrote:At 12.9% kcb and co are doomed. What forms the basis of your judgement. Kenyan banks could lend at 5% and still make a profit.. It all depends on cost of funds.. Recalibration of the accounts that qualify for the minimum of 70% on CBR shall determine which bank thrives.. COOP via the SACCO movement remains the best bet to ride this wave With a gross spread of 6% and npls higher, how will they earn a profit? The aim is to maintain the market share so for a while the profit motive takes a chill. I would bet Equity would come at 12% and effectively wipe out the Sacco movement's value proposition. Why would anyone borrow their own money at 12% when you can get it from the bank? I would expect Sacco deposits will shrink so Coop would the worst bus So it means SACCOs are likely to become irrelevant if banks can lend Wanjiku without security at these low interest rates?? Yes. But if both Banks and Saccos were to levy at 12%, the Saccos will still have an edge due to the ease of getting the loan from Saccos since no collateral is required, just a trust from guaranters! Banks has to go lower, perhaps to 9% in order to edge out Saccos! Portfolio: Sold
You know you've made it when you get a parking space for your yatcht.
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Rank: Member Joined: 3/3/2016 Posts: 132
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Swenani wrote:Plimsoul wrote:Irony of using KBRR is that because it's lower, banks move to lending to govt. So tbills drop, and because tbills make up KBRR, KBRR drops further. CBK wont even have to change CBR.
Interesting times ahead.
I do no think so, govt domestic borrowing currently stands less than 450B per year as compared to bank totla loan book of 1.2 Trillion and assets of 2.4 Trillion. Hence govt borrowing makes up a small percentage of the banks loan book, if the returns on T Bills are negligible, banks will simply stop buying them. But KBRR links tbills and the lending rate. So if tbill returns are tiny, then the lending rate will also be very low. Cycle continues.
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