Banks record 53pc profits increase on economic recovery

Banks’ pre-tax profits for the seven months to July jumped 53.2 percent and surpassed last year’s full-year earnings, pointing to continued recovery from the Covid-19 menace with customers stepping up loan repayments.

Latest Central Bank of Kenya (CBK) data shows pre-tax earnings in the seven months hit Sh113.4 billion to race ahead of the Sh112.8 billion posted in the full year ended December 2020.

The jump came in a period when banks increased lending and cut the size of non-performing loans (NPLs) due to a rise in repayments and property auctions.

The latest profit translates to a 53.2 percent jump from the Sh74 billion profit that lenders returned in seven months last year when Kenya imposed Covid-19 restrictions.

Slowed lending following reduced economic activity after Kenya’s first Covid-19 case in March 2020 and costs linked to mounting defaults or provisions cut lenders’ profits 29.5 percent.

But the easing of restrictions and rollout of Covid-19 vaccines this year has triggered a gradual recovery in the economy, prompting banks to boost lending amid repayment of defaulted loans.

NPLs have dropped for the fifth consecutive month to close July at Sh433.3 billion from a peak of Sh444.2 billion in February, offering a reprieve to lenders. The fall in bad loans has seen the proportion of NPLs to the sector’s loan book fall to 13.8 per cent — the lowest in nine months. It was at 13.6 per cent last October.

Banks have expanded the loan book by Sh310.3 billion or 7.2 percent to Sh4.332 trillion between January-July, buoyed by falling loan defaults.