The theme of industry consolidation in the banking sector continued on the back of upped capitalisation requirements by the Apex bank. Building societies to CY21 were mostly under-capitalised necessitating a succession of mergers for compliance. The competition and tariffs commission is however still mulling approvals for some of the larger corporate actions in the pipeline notably CBZ/FML. With the fulfillment of capitalization requirements by Tier 1 banks, 1H22 results saw a material increase in dividends from the sector.
Appetite for lending banks has been increasing gradually with funded income accounting for c.40% of income in 2021 versus 21% in 2020 and Loan to deposit ratio gaining 10.4 percentage points y/y. Increased FCA balances in the banking system and aid in the form of external credit lines have enabled USD denominated business for the sector and as such 65.9% of loans were foreign currency denominated to June 2022.
