Abstract: Banks raises the interest rate on loan repayment so as to earn revenue that is enough to cater for the deposit costs, other expenses such as non-repayment of loans. The banks also cannot raise these interest rates too high as this can create poor relationship with its clients. The balance between the two poses a challenge within the banking sector. Therefore, this study sought to investigate the effects of operational costs on financial performance of tier 1 commercial banks in Kenya. A descriptive research design was employed. The 8 tier 1 commercial banks in Kenya formed the unit of analysis. The study data was obtained from the secondary source including the audited financial statements of these banks. The analysis of the data was descriptively done using mean and standard deviations. In addition, the application of inferential statistics was done to determine the association between the variables. The study found that operational cost had a positive significant effect on the financial performance of tier 1 Commercial Banks in Kenya. The study concluded that that there were effective policies at the bank to govern the operating cost and administrative cost of the Banks. The Non-interest income, like trading income and fees, makes up a higher portion of the profits of larger banks. The study recommended that all the Tier 1commercial banks in Kenya should have effective strategic plans and operating procedures, according to the management of the banks, as this will save operating expenses.
Keywords: Operational Costs, Financial Performance.
Title: EFFECTS OF OPERATIONAL COSTS ON FINANCIAL PERFORMANCE OF TIER 1 COMMERCIAL BANKS IN KENYA
Author: Geoffrey Nyamari Angima, Dr. Moses Odhiambo Aluoch
International Journal of Social Science and Humanities Research
ISSN 2348-3156 (Print), ISSN 2348-3164 (online)
Vol. 11, Issue 1, January 2023 - March 2023
Page No: 89-95
Research Publish Journals
Website: www.researchpublish.com
Published Date: 26-January-2023
