Banking sector profits jump 63% as loan repayments improve

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Business arrow graph shows business success. [Getty Images]

Pre-tax profits of banks for the nine months ending in September rose 63.1%, surpassing profits for the full year 2020 thanks to the increase in loans and the reduction in defaults.

New data from the Central Bank of Kenya (CBK) shows profits reached 145.48 billion shillings during the reporting period, compared to 89.2 billion shillings released in a similar period last year .

The CBK said in the credit investigation report that banks made 49.08 billion shillings in the third quarter ended in September to add to the 50.53 billion shillings and 45.9 billion shillings made respectively. in the second and first trimesters.

Profits topped last year’s annual profits by 32.68 billion shillings, indicating an increase in loans and a drop in defaults, with borrowers increasing repayments and lenders stepping up recovery through auctions .

The latest profits are also above the 125.3 billion shillings made by banks in the nine-month period ended September 2019, which means they are now above pre-pandemic levels.

Sector profits are in line with results reported by major lenders such as Equity Group, Standard Chartered Bank Kenya and KCB.

Equity Group’s third-quarter net profit jumped 78.6% to 26.8 billion shillings, surpassing profits made in the fiscal year ended December 2020.

Standard Chartered announced its net profit growth of 46.6% to 6.3 billion shillings in the nine months, prompting its board of directors to declare an interim dividend of 5 shillings per share.

The CBK said personal and household borrowing as well as corporate borrowing led to the growth of the loan portfolio.

“Perceived demand for credit has increased in the personal and household, trade and manufacturing sectors. This is attributed to the continued normalcy of economic activities, ”said CBK.

The quality of banks’ assets, measured by the proportion of loans in default, improved from 14% in June to 13.6% in September.

The improvement in asset quality was attributed to a 2.7 percent increase in gross loans to 3.19 trillion shillings, which was greater than a 0.09 percent increase in non-performing loans to 434 , 28 billion shillings.

Banks have slashed money set aside for defaults, with many citing the improving economic health of borrowers who had not kept up with repayments during the height of the coronavirus disruption.

The September Credit Survey report shows that the majority of banks (41%) expect defaults to decline in the quarter ending in December, while 33% expect them to decline. that the faults remain unchanged.

“This is attributed to the enhanced recovery efforts implemented by most of the banks,” the CBK said.

The main sectors in which banks intend to step up their credit recovery efforts are commerce, individuals and households, building and construction, real estate and manufacturing.

However, 26% of those polled said they expected the level of non-performing loans to increase in the fourth quarter due to the continuing difficulties of the pandemic.

In the quarter ended in September, 68 percent of banks posted an increase in their liquidity, providing leeway to step up their lending as the economy recovers.

About 23% of banks told the CBK they would invest the extra cash in Treasury bonds while 21% said they would lend to the private sector.


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