TABLE OF CONTENTS. Declaration .................................................................................... i Dedication .................................................................................... ii Acknowledgement ......................................................................... .iii approval.................. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . ......... .iv Table of content .............................................................................. v List of Tables ................................................................................. vii Abbreviations ................................................................................ viii Abstract ......................................................................................... .ix CHAPTER ONE 1.1 Back ground of the Study ............................................................... I 1.2 Problem statement ........................................................................ 3 1.3 Purpose of the Study ..................................................................... 4 1.4 Objectives ................................................................................. 4 1.5 Research questions ........................................................................ 5 Geographical Scope .......................................................................... 5 Content Scope ................................................................................. 5 1. 7Significance of the Study ................................................................. 6 1.8 Conceptual framework .................................................................. 7 CHAPTER TWO 2. IIntroduction ....................................................•........................... 8 2.2 Defining sho1t term investment ......................................................... 8 2.3 Factors affecting short term investments .............................................. 9 2.4 Measures of Financial Performance .................................................... 9 2.5 Profitability analysis ...................................................................... I 0 2.6 Capital Adequacy Ratios ................................................................ .I 0 2. 7 Long Term Solvency ..................................................................... l l 2.8 Earning and profit performance ......................................................... 11 2.9 Government Securities .................................................................... 11 2.9.1 Banking Crisis ........................................................................... 12 2.9.2 Bank Restructuring ...................................................................... 13 2.9.3 Relationship of short term investments and financial performance ............... 15 CHAPTER THREE 3.0 Introduction ................................................................................. 16 3 .1 Research Design ............................................................................ 16 3.2 Area ofStudy ................................................................................ 16 3.3 The Study Population ...................................................................... 16 3 .3 .I Selection of Respondent ................................................................. 17 3.3.2 Data Collection Methods ................................................................. 18 3.3.3 Instruments of Data Collection ................................................... ....... 18 3.3.4 Structured interviews ..................................................................... 18 3.3.5 Observations Research .................................................................... 19 3.3.6 Secondary Data ............................................................................ 19 V I I I 3 .3. 7 Validity and reliability of instruments ................................................... 19 3.3.8 Data Processing and Analysis .............................................................. 20 3 .3. 9 Research Procedure ........................................................................ 20 3.4.0 Limitations of the Study .................................................................... 20 CHAPTER FOUR 4.0 Introduction ..................................................................................... 21 4.1 Section one: Background information ...................................................... 21 4.2 Section two: Verification of Research questions .......................................... 24 4.3 Research question one ......................................................................... 25 4.4 Research question two ........................................................................ .26 4.5 Research question three ....................................................................... 30 CHAPTER FIVE. 5.0 Introduction .................................................................................... 33 5.1 Discussions ..................................................................................... 33 5.2 Conclusion ...................................................................................... 33 5 .3 Recornmendation .............................................................................. 34 REFERENCES ...................................................................................... 37 INTERVIEW GUIDE FOR THE HEADS OF KCB SECTIONS ........................... 39 QUESTIONAIRE FOR KCB EMPLOYEES ................................................... .40 QUESTIONAIRE FOR KCB CLIENTS ....................................................... .43 VI LIST OF TABLES Table I: Gender distribution of the respondents ............................................ 22 Table 2: Distribution of Respondents by their level ofEducation ........................ 23 Table 3: Distribution of the Respondents experience with the organization ............ 24 Table 4: KCB source ofrevenue ............................................................... 25 Table 5: Invest1nent options .................................................................... 26 Table 6: Effects of Short term investments on financial performance of KCB .......... 27 Table 7: Factors affecting KCB Short term investments .................................... 28 Table 8: Problems faced by KCB on short term investments ............................... 29 Table 9: Factors enhancing KCB financial performance and profitability ............... 30 Table 10: Management strategies put in place for KCB smooth operations and smooth trading on short term investments ................................................... 31 I Vil KCB- Kenya Commercial Bank. NBI- National Bank of India NOB- National Gridlay Bank

ABBREVIATIONS KCB(T)- Kenya Commercial Bank ( Tanzania) KCB(S)- Kenya Commercial Bank (Sudan). NSE- Nairobi Stock Exchange. CPA- Certified professional Accountancy. CPA(K)- Ce1tified Professional Accountancy ( Kenya) ROA- Return on Assets. ROE- Return on Equity Vlll

ABSTRACT.

Commercial banks are established with the prime purpose of encouraging savings among the customers/clients. They accept deposits from the public and in turn advance loans and add value to those deposits. Investments is the act of sacrificing the current finances or loans Ltd. During 1980's it embarked on a major expansion program with an extending banking service to areas, which had not been previously served, by banks. This affected its profits adversely as many rural branches incurred losses but in recent years rural network has become more profitable because rural deposits have been channeled into high yielding investments. It also avoided incurring significant bad debts by having most of limited lending properly secured and this boosted its profitability by low cost of its funds with almost half its deposits consisting of demand deposits.