An evaluation of bank restructuring approaches adopted by the three leading commercial banks in Kenya.
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Date
2003-10Author
Kithinji, Angela M.
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
Bank restructuring IS an important aspect in minimizing bank failures and in
improving the financial performance of banking institutions in both developed and
developing countries. Bank restructuring is usually necessitated by bank failures
where it serves as a medication for restoring financial health to individual banks and
financial systems. Banks also restructure to avoid anticipated negative impact on
performance of the banks either as a result of the changes in the broad macroeconomic
.environment or changes in the business environment.
This study reviews literature on bank restructuring, and exarnines the related
approaches that commercial banks in Kenya have adopted and the implications these
have had on bank profitability. In this respect, the bank restructuring approaches
adopted by three Leading banks that is, the Standard Chartered Bank, Barclays Bank
and Kenya Commercial Bank have been analysed. The three banks control over 50
per cent of the total assets of commercial banks in Kenya.
The analysis shows that the main bank restructuring approaches that the three Kenyan
Banks have adopted are operational restructuring and asset restructuring. The former
includes human resource restructuring, rationalization of the branch network,
improved management and accounting and better credit assessment and approval
techniques, whereas the latter entails liquid asset expansion and minimization of nonperforming
loans.
Although the profitability for the study banks generally improved following the
implementation of the restructuring measures, no clear correlation was established
between bank restructuring approaches and bank profitability since other factors other
than bank restructuring also played a role in influencing profitability. These include
lucrative interest income from Treasury Bill investments occasioned by the need to
finance government deficits and the reduction of cash and liquidity ratio requirements
by the Central Bank.
Citation
Degree of Doctor of Philosophy in Finance in the University of NairobiPublisher
University of Nairobi School of Business
Description
An Independent Study Paper submitted in partial
fulfillment for the Degree of Doctor of Philosophy in
Finance in the University of Nairobi