Residential Mortgage Portfolio and Performance of Commercial Banks in Kenya
The purpose of this study was to investigate the relationship between residential mortgage portfolio, product innovation, firm characteristics and performance of commercial banks in Kenya. One of the specific objectives was to establish the effect of the relationship between residential mortgage portfolio and bank performance. The study was guided by the positivism philosophy and principles and adopted correlational descriptive research design. The study collected and utilized panel data from the annual residential mortgage surveys conducted by the central bank of Kenya (CBK) on commercial banks covering a 13-year period from 2006 to 2018. Secondary data was collected from the financial statements of commercial banks and Kenya Bankers Association database. Data was analyzed using descriptive and inferential statistics. Hypotheses were tested through the panel regression models and the Baron and Kenny (1986) approach. The results revealed that residential mortgage portfolio attributes, namely: portfolio quality and mortgage interest return, significantly influence bank performance. The study calls on bank managers to structure their mortgage portfolio quality and interest returns in a way that ensures better performance. Future studies should consider the use of residential mortgage portfolio as a composite variable based on tested methodologies for more insight on bank performance.
Keywords: Residential mortgage portfolio, Portfolio size, Portfolio quality, Mortgage interest return, Commercial banks