Political uncertainities and risk at times crystalise with devastation and total despair. For the sake of unbelieving Tomases lets say syria is burnt, Somalia was berbecued, rwanda was multilated, libya was imasculated...... The list is long and real. Pray, if u like facing mt kenya, do it verily. If u like facing the earth, its the high time u do so. Do something, dont just sit there do something for the sake of countrymen of kenya.

I think the worst politically is coming,

First, there is an almost complete evaporation of liquidity especially in smaller segments of the banking sector. The number of banks clinging on their licences through emergency injections of liquidity from the Central Bank of Kenya (CBK) have increased from what we saw in quarter one.

Secondly, a very high number of small banks are operating below minimum capital requirements and are muddling through with elevated non-performing loan levels that are eroding their capital bases and gradually driving some of them towards insolvency.

Thirdly, we are now seeing a trend where banks are facing major challenges in terms of ability to operate the legacy model of accepting deposits from the public and lending them to businesses at a profit.When you look at the numbers closely, you will find that nearly ten banks cannot continue operating on the legacy business models because the cost structures are misaligned with revenues. They are not making money from intermediation.

When you look at the statistics on cost income ratios, the inescapable conclusion is that the reason many of our banks are still in business is because they have resorted to the easy option of trading in government paper. They are not banks-anymore. They have become traders.
Clearly, the operating environment for the banking sector is slowly deteriorating by the month. Key statistics such as the percentage of non -performing loans to capital, earnings, revenue growth, cost to income ratio and return on capital, point to depressing times for large swathes of our banking sector.

Watching this credit crunch is most fascinating









http://www.businessdaily...6872-i1sblqz/index.html

It is most likely a reflection of stressed private sector balance sheets in the economy. However, the rate-capping law, has without a doubt- exacerbated the situation. We are witnessing the consequences of the folly of imposing interest rate caps in an environment of high non-performing loans in the banking sector.

We are now at 3,591 pointing South

[quote=wukan]

The writer got that correct. Interest caps served to make a bad situation worse. However, the real culprit for high interest rates and the mess KE finds itself in is the govt. By introducing the capping regime it passed its cross to the banks and the private sector in general. It doesn't end well from there whichever way you slice it.

Assuming the interest caps are repealed, I expect a crisis on NPLs and liquidity fronts at least in the short term. If they are not repealed by end of 2018, KE is going to have a banking crisis which will force GoK's/parliament's hand in a quick about turn/repealing of the caps. Not pretty either way but the former is the more palatable option.

A short term-long term trade off structurally, fiscally and monetary wise is lurking in the shadows and will have to be dealt with very carefully. To steady the macros, public sector driven growth, the resultant borrowing and heavy taxation has to be dialed down significantly which will help with slimming the twin fiscal and current account deficits. This will afford the private sector some breathing space and thereafter enable it to thrive. Failure to do that will lead the govt into a strait jacket of uncomfortable/painful decisions followed by long term ugly consequences.