Headlines

Kenyans Haven’t Paid Ksh 514.4 Billion In Defaulted Loans To Banks

BY Lynnet Okumu · August 29, 2022 10:08 am

KEY POINTS

The increased stock of defaulters on the non-performing ratio to 14.7 percent in June - beating levels last seen in August 2007 when it stood at 14.4 percent.

The rise of gross non-performing loans (NPLs) by 20.5 percent - from 426.8 billion shillings in December 2021 to the record 514.4 billion shillings - presents a dark spot-on bank’s continued rise in profitability.

KEY TAKEAWAYS

Banks have in the half-year period increased their loan book by 244.1 billion shillings, or 7.5 percent, to close June at 3.492 trillion shillings.

The rising defaults also come when banks are beginning to increase lending to the private sector, with the pace hitting 12.3 percent in June 2022.

The latest data from the Central Bank of Kenya (CBK) shows the stock of credit for which principal or interest has not been paid for at least 90 days rose for the sixth straight month to 514.4 billion shillings at the end of June 2022.

The increased stock of defaults has sent the non-performing ratio to 14.7 percent in June – beating levels last seen in August 2007 when it stood at 14.4 percent.

The rise of gross non-performing loans (NPLs) by 20.5 percent – from 426.8 billion shillings in December 2021 to the record 514.4 billion shillings – presents a dark spot-on bank’s continued rise in profitability.

Banks have in the half-year period increased their loan book by 244.1 billion shillings, or 7.5 percent, to close June at 3.492 trillion shillings.

The rising defaults also come when banks are beginning to increase lending to the private sector, with the pace hitting 12.3 percent in June 2022.

The latest results released by major commercial banks in the country show how the banks’ net earnings have increased over time. Moreover, they also give the performance of the non-performing loan as follows

Kenya Commercial Bank (KCB)

KCB’s loan loss provision shrunk by 2.2 billion shillings to 4.3 billion shillings despite the stock of gross non-performing loans rallying 81.1 percent to 173.4 billion shillings.

According to Central Bank of Kenya data, the average interest rate on KCB’s short-term corporate loans increased from 12 percent in March to 12.7 percent in June.

Provisions decreased 34.4 percent due to a drop in corporate and digital lending impairment charges. Appropriate IFRS 9 staging in prior years had already recognized associated impairment.

Equity

Provisions for non-performing loans saw NPL coverage reach 94 percent and 120 percent with credit risk guarantees and the mass distribution of Covid-19 vaccines.

As usual, the pandemic business has left the Group strategically positioned for balance sheet efficiency and optimization.

National Bank of Kenya (NBK)

NBK loan loss provision increased, highlighting the challenging lending environment of a tough economic period.

Despite these challenges, the bank’s loan book grew to 69 billion shillings and customer deposits grew to 112 billion shillings.

The bank maintained a strong balance sheet; total assets grew by 4 percent to 139 billion shillings added

Co-operative bank

Earnings from loans grew by 11.8 percent from 18.8 billion to 21.1 billion shillings in the review period.

The bank said five million customers have already been registered on the mobile banking platform and loans worth 40.8 billion disbursed year-to-date, averaging over 6.8 billion shillings per month.

Absa Kenya

Absa Bank has reported a net profit of 6.3 billion for the half year 2022, representing a 12.9 percent rise from 5.6 billion in a similar period last year.

The rise in profitability was on the back of higher yields from loans and advances as the bank adjusted to prevailing lending rates and increased lending to the private sector. The higher rates and increase in lending pushed up the banks’ interest income by 21 percent to 14 billion.

Non-funded income rose by 10 percent to 6.4 billion on higher returns in the foreign currency market

Non-performing loan ratio also increased by 7.02 percent to 281.6 billion and is expected to be better than the industry average demonstrating the prudence of the Bank’s lending decisions.

NCBA

NCBA’s loan book quality improved with gross non-performing loans falling to 36.9billion shillings from 45 billion shillings in June of 2021.

Standard Chartered Bank

Customer deposits grew by 8 percent to 286.9 billion shillings at Standard Chartered as loans and advances to customers was up slightly by 2 percent to 128.5 billion shillings.

The lower provisions for potential loan defaults are anchored on a slight downturn in bad loans with the lender’s gross non-performing loans (NPLs) registering a slight dial-down to 22.7 billion shillings from 22.9 billion shillings in June 2021.

The lender said current, and savings accounts now make up 92 percent of total customer deposits.

I&M Bank

It recorded an 18.7 percent rise in net interest income from loans and commissions to 10.5 billion shillings from 8.9 billion shillings, an increase from 8.9 billion in June 2021.

The net non-performing loans stood at 2.3 percent, decreasing by 31 percent year on year on the back of increases in the loan book and recoveries.

Customer deposits closed at 313 billion, a 13 percent increase year on year.