Kenyan commercial banks will have a tough time pulling through the fast-spreading Coronavirus if the situation worsens.
According to Moody’s Corporation, measures put in place by the Central Bank of Kenya (CBK) to shield Kenyan banks against Covid-19 might not hold longer if the situation worsens.
Moody says if the situation worsens, it is likely to have a prolonged disruption in key sectors that will lead to millions of customers defaulting on their loans leading to some of the banks’ collapse.
CBK in conjunction with Kenya Bankers Association directed banks to give a loan payment break to their customers for at least three months but the Coronavirus situation is likely to move beyond the set timelines.
“Equity Bank Kenya faces the greatest exposure because 59 percent of its loan book was exposed to SME lending as of December 2019,” said Moody’s. The bank, however, has been given a rating of B2 stable, b21.
The Co-operative Bank of Kenya has been rated at B2 stable b2. The loan book of the lender exposed to SMEs was at 6 percent as of the month of June 2019. Kenya Commercial Bank has been rated at B2 stable, b2 with personal loan exposure of 4 percent.
According to Moody’s, although Kenyan banks have the ability to renegotiate loan payment terms with their customers as directed by CBK, the measures might not work in favor of the banks of the situation persists.
Kenya has over 42 commercial banks serving a bankable population of not more than 10 million with the majority of Kenyans preferring mobile phone banking as compared to traditional banks.
On Thursday, Kenya announced an additional 29 confirmed cases of Covid-19, taking the total number of confirmed cases to 110 with the government through the Ministry of Health, telling Kenyans to prepare for the worst.
Will Kenyan banks wade through? Only time will tell.