Bank of Africa Kenya has sunk into losses for the first time in a decade, taking a hit from a mounting stock of bad debts linked to a Moi-era contractor and Mumias Sugar among other borrowers.
The mid-sized lender — controlled by BMCE Bank of Morocco — made a net loss of Sh1.02 billion in the full-year ended December compared to a net profit of Sh144 million a year earlier.
BOA Kenya’s earnings were hit by a five-fold increase in loan loss provisions to Sh2.1 billion, signalling the potential exposure to defaulting borrowers.
The bank’s gross non-performing loans quadrupled to Sh9.7 billion from Sh2.4 billion, with the lender saying 15 large customers accounted for more than half of the bad debts.
“The growth in loans which went bad impacted on our business. There has been a lot of clean-up and we think it will take about three years to recover a significant part of the money,” said Mr Ronald Marambii, the bank’s managing director.
BOA Kenya in November last year appointed Mr Marambii as its first Kenyan chief executive succeeding Anis Kaddouri who held the position in an acting capacity for 14 months following the exit of Kwame Ahadzi.
The mid-tier lender is currently in court seeking to recover Sh476 million it lent Kundan Singh Construction International Ltd, which controlled multi-billion-shilling construction contracts during former president Moi’s regime.
BOA Kenya declined to disclose the bank’s exposure to Mumias, having been part of a group of financiers who advanced the sugar miller a syndicated loan.
“The bank will of course also focus on debt collection with a preference to rehabilitating non-performing debtors that have feasible repayment proposals so as to support businesses continuity of such clients,” said Mr Marambii.
A loan is considered to be non-performing if it is not serviced for a period of more than three months.
CBK guidelines require banks to set aside cash equivalent to 20 per cent of loans called sub-standard whose instalments have not been paid for three to six months, and 100 per cent provisions for doubtful loans, which have not been repaid for more than 180 days.
BOA Kenya said interest income generated from loans and advances grew 14.5 per cent to Sh6.2 billion. The bank’s loan book fell by Sh665 million to Sh37.7 billion as at December 2015.