There is some grain of truth in the excuse. The low tier banks are the ones likely to suffer most from interest capping and the tiers ones to benefit the most.

It is a vicious catch 22:

(1) Small banks lose the capacity to market (mostly consumer) loans to risky sectors - profitability declines and a few of them shut down. Tier ones pick up the pieces

(2) A stampede results from the above as depositors move their money to so called 'safe' banks. Tier ones benefit

(3) In a desperate effort to survive, some tier 3 and 4 consolidate, sell off to strategic investors or become conduits for the entry of Multinational banks. Tier ones (KCB) pick up some juicy properties on the cheap

Either way the Mwangi's, Muriukis and Oigara's are sitting pretty. Oigara was once quoted as saying 'Cap or no Cap, the [big] banks will be OK..." He knew what he was saying

And the CBK Governor seem to have long given up his argument that small banks should be defended because they serve niche markets that the big ones don't. He has made barely a peep as the move to raise capital requirements is reintroduced. You recall the earlier effort was shelved at his insistence.

Nevertheless this is one time when allowing market forces to play out might be beneficial to Wanjiku, despite the long term risk of creating behemoths 'too big to fail.'

The massive investments in process reform and technology that the big banks have made has enabled them to shrug off the impact of Caps and continue to make huge profits. Wanjiku and the wider economy are the ultimate beneficiaries here - one reason I support the ongoing consolidation. The likes of Sanlam and even Family Bank, with their small and shaky capital bases, would be hard pressed to make such investments and should be taken over.

Yeah I don’t get the “rate cap angle” to the profit warning here

Everything is connected. Even your current balance in the wallet right now is somehow tied to the cap

I am not seeing the contradiction, other than in baptizing Sanlam a bank, which Angelica and Obiero have already pounced on (my bad).

Lets assume Sanlam is a small bank, in the vein of Jamii Bora, Family Bank et al. Its margins are squeezed to the point it has to merge or sell out - resulting in a much bigger bank; one that has the cash to innovate and thus expand their reach, lower costs and even take more risks. In my opinion Wanjiku benefits (as do the banks).

JM recently said that since banks stopped lending to high risk Wanjiku, in an effort to arm twist the government, many people have taken refuge among Shylocks. Guess who the biggest Shylock in town is today? The microlending platforms like Mswhari, KCB, Equitel, Branch, Tala etc. In fact Wanjiku is spoiled for choice. In the short term this is still a benefit to her, one enabled by the ability of those banks to innovate and spend big on the tools and processes needed to thrive in a constrained operating environment.

The long term dangers you point out are real. But Bank oligopoly and state capture has been part of our reality for years and is not likely to end soon; anymore than the Energy cartel did after sector regulation was introduced. Even the systemic danger of 'too big to fail banks' is somehow mitigated by the fact that the KCB's, Equity's and Cooperative, in an effort to escape stiff competition at home, are aggressively spreading out of Kenya, something that the hostile environment of regulation will only accelerate.

We cannot invest abroad.. Hapo tuko pamoja mzee

Asante @Wakanyugi.. Spoken like a true elder

No

You read me wrong my friend. I am neither a market hawk nor an interventionist. I consider myself a pragmatist, the only caveat being: What is best for Wanjiku?

Thus I support an interventionist approach to control Banks greed as this benefits Wanjiku. But at the same time I support market driven sector consolidation, which will result in better capitalized banks that do not have to levy usurious interest rates to stay afloat.

Ergo, Wanjiku benefits. Where is the contradiction?