Manufacturing, Real Estate and Trade ranked as top bank loan defaulters

The manufacturing, real estate and trade sectors recorded the highest non-performing loans between June and August this year according to the Central Bank.

“The ratio of NPLs to gross loans increased to 10.7 per cent in August from 9.9 per cent in June. The largest increase was in the three sectors : manufacturing, real estate and trade,” Central bank governor Patrick Njoroge said on Tuesday.

The manufacturing sector which include one sugar factory, cement factory and plastic factory contributes Ksh 5 Billion, the real estate sector which includes two projects – golf club and housing contributes Ksh3.9 billion both cumulatively Ksh 9 billion.

The Monetary Policy Committee had further noted that, “The distribution of liquidity in the sector is expected to continue to improve, but credit risk remains elevated as some large corporates continue to restructure their borrowings.”

Read: What is the Truth behind Non-Performing Loans: Employees or Customers?

Central bank governor Patrick Njoroge said an additional Ksh 2.8 billion shillings was added by the trade sector in the period.

However, “A lot of these relate to delayed payment by government, both the national and county and we expect the numbers to look better as they get paid,” said Njoroge.

The last nine months have been very tough for the banking sector in the country as the many borrowers fail to honor their loan obligations. This has been blamed on worsening economic environment, political uncertainty and drought.

The credit survey by CBK showed that gross loans decreased 0.84 per cent from KSh2.38 trillion in March 2017 to KSh2.36 trillion in June 2017, one of the lowest expansion rates in recent years.

The MPC had also said, “Growth of credit to the private sector recorded a slight increase to 1.6 percent over the 12 months to August 2017 from 1.4 percent in July 2017, reversing the downward trend since August 2015.”

For instance, “Listed bank’s H1’2017 EPS declined by 13.8 percent y/y from an average growth of 15.5 percent witnessed in H1’2016, following the capping of interest rates,” according to Cytonn Investments Half Year 2017 banking report.

The poor performance was on the back of a decline in Net Interest Income (NII) following the capping of interest rates. The Net Interest Margin (NIM) declined to 7.7 percent in H1’2017 from 8.4 percent in H1’2016.

Listed banks recorded gross loans and advances growth of 9.3 percent to Kshs 1.9 tn in H1’2017 from Kshs 1.7 tn in H1’2016, slowing down from the 5 year average growth rate of 14.6 percent. On the other hand, deposits grew 14.4 percent to Kshs 2.4 tn in H1’2017 from Kshs 2.1 tn in H1’2016, faster than the 5 year average of 12.8 percent.