dc.description.abstract | The objective of the study was to establish the relationship between the noninterest
income and the financial performances of commercial banks in Kenya. Banks
have a vital function in the economy. Traditionally banks have been thought of as
firms which take deposits and make loans, and profit by the difference between the
costs of the former and the earnings from the latter activities. Commercial banks in
Kenya have experienced significant new competition and have lost valuable
regulatory protection. Non-interest income have been used as a form of diversification
due to the changing levels of competition, economical situations, and changes in
technological innovation in the banking sector. Advances in information and
communications technology (for example, the Internet and Automatic Telling
Machines (ATMs),new intermediation technologies for processes like loan
securitization and credit scoring, and the introduction and expansion of financial
instruments and markets (high yield bonds, commercial paper, financial derivatives)
all impacted on the levels and types of non-interest income at commercial banks.
The study used a descriptive research design. The population of the study was 42
commercial banks operating between 2010-2014.The data was analyzed using SPSS
version 20 and descriptive analysis, correlation analysis, ANOVA tables and
regression analysis obtained. The study shows that there was a negative relationship
between increase in non-interest income and financial performance occasioned by the
variability in the ratio of non-interest income and net interest income. The p-values
indicated significance levels of non-interest income in regression model though
negative. The study concludes that non-interest income contributes positively to the
financial performance of commercial banks though it diminishes ratio when compared
with net interest income and volatility of returns. The study recommends that when
numerous non-interest income activities are well managed, will lead to improved
financial performance and mitigate banks against volatility of earning in long run.
This may be attributed to stability of earning provision of product and services based
on relationship banking. | en_US |