An analysis of the end-year financial results of leading banks shows a trend that they indeed are stashing up large amounts of cash.

In the year ended 2010, the Kenya Commercial Bank had retained earnings of Kshs. 15,388,072,000. The retained earnings that KCB reported in its 2011 end-year financial results is Kshs.18,276,521,000. That is almost a 3 billion-shilling increase in reserves.

Co-operative Bank of Kenya had Kshs. 9,859,051,000 in retained earnings in its 2010 end-year report. This figure has now jumped to Kshs. 10,654,898,000 in the retained earnings of the year 2011.

Standard Chartered Bank had Kshs. 7,872,096,000 in its books as reserves in 2010 and the figure, as of the 2011 financial results, is Kshs. 10,240,075,000.

National Bank of Kenya’s retained earnings in 2010 was Kshs. 2,006,611,000 and in 2011 the figure rose to Kshs. 2,501,446,000.

Equity Bank Limited had retained earnings of Kshs. 11,940,868,000 in its 2010 books. This figure has risen by 50.5% to Kshs. 17,974,523,000 as of the 2011 end-of-year financial results.

Cash holdings and net balances due from the Central Bank of Kenya increased in all the above companies with only Co-op bank reporting a slight drop in its balances due from the CBK. Balances due from the central bank is essentially money that the Central Bank of Kenya owes to these banks; in other words, money that the banks have stored with the central bank.

Retained earnings?

Retained earnings is that portion of a company’s net income that it is retained in the business and not distributed to shareholders as dividends, usually to expand operations or pay out debt.

A reason for the large money holdings could be to finance expansion programs in a difficult economic environment whereby the cost of borrowing is high.

Are our banks signalling a sign of tougher economic times ahead?