Abstract: Commercial banks in Kenya have undertaken restructuring so as to be more competitive, to restore bank solvency, to increase the banking sector capacity for financial intermediation and to improve financial performance. The main objective of the study was to investigate the relationship between bank restructuring, customer loans and financial performance of commercial banks in Kenya. The population of the study was the 44 commercial banks licensed and registered under the banking act to do business in Kenya. This study was able to gather information from financial statements of 39 out of the 44 commercial banks which were in operation for the period 2002 to 2014. Descriptive and inferential data analysis methods were used to analyze the secondary data gotten from the available financial records of commercial banks. The findings of the first model revealed that capital and asset restructuring were the only variables found to have significant influence on the performance of commercial banks in Kenya. In testing the customer loans as an intervening variable on the relationship between bank restructuring and financial performance, the study established that financial restructuring and capital restructuring were found to significantly cause an increase in the profit margin of commercial banks while operational restructuring and customer loans were found to have a significant negative effect on bank profits. The research concludes that the performance of most commercial banks in Kenya is determined through restructuring banks’ financial and capital ratios and that the customer loans of banks is a significant variable in influencing financial performance of all banks. The study recommends that there is need to institute policy reforms geared towards viable restructuring and that to continuously improve bank performance banks should encourage more borrowing and funds from shareholders and banks need to continuously focus on restructuring rather than customer loans.
Keywords: Bank restructuring, Financial Performance, Commercial Banks, Customer Loans.
Title: The Control Effect of Customer Loans on the Relationship between Bank Restructuring and Financial Performance: A Case of Commercial Banks in Kenya
Author: Dr. Angela Mucece Kithinji
International Journal of Interdisciplinary Research and Innovations
ISSN 2348-1218 (print), ISSN 2348-1226 (online)
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