Merger restructuring and financial performance of commercial banks in Kenya

Abstract

This study set out to achieve the following objective: Assess the financial performance of Kenyan Banks restructured using the merger approach. Profitability and earnings, capital adequacy and solvency indicators were used to determine implications of merger restructuring 'on performance of commercial banks. Secondary data obtained from Financial statements and various publications was used in the study. The data was then analysed with the aid of Microsoft (MS) Excel statistical package. On financial performance evaluation of the merged institutions, it was observed that though there is improved performance in some cases, the extent of the contribution cannot be said to be significant. The general observation is that other than for indicators with legal requirements by the Central Bank of Kenya (Capital adequacy and Solvency ratios), merger restructuring has not improved the financial performance of the majority of merged institutions as indicated by the profitability and earnings ratios. It is however important to note that the ratios that gave a higher indication on financial performance of the merged banks are those that have legal implications: Capital adequacy and Solvency. Profitability ratios however indicate that the majority of the merged banks reported a decline in financial performance.