Evaluation of financial performance of commercial banks in Kenya

Abstract

This study was carried out to achieve one key objective namely, to establish whether there is any significant difference between the performance of the locally established banks and the foreign banks with operations in Kenya. Secondary data on financial performance of banks was obtained mainly from commercial bank's financial statements and CBK Bank Supervision. The data was analyzed using MS Excel statistical package to obtain averages of the various financial performance ratios for both local and foreign banks. Using the same statistical package, trend analyses were done over the study period so as to compare the two categories. Finally t-tests were performed so as to test the hypothesis that there is no significant difference between the financial performance of local and foreign banks. The results realized from the study showed that, of the eight ratios used, two indicated that there is no significant difference between the financial performance of the two categories. However, the rest of the ratios (six) showed that there is a significant difference between the financial performance of the two categories. Hence the overall conclusion was that there is a significant difference in financial performance of the two categories. The trend analyses showed that the financial performance of the local banks was poor, just as the general economic situation in the country as shown by the NSE Index over the study period.