Co-op, StanChart record profits decline on Covid-19 loan defaults

Co-operative Bank of Kenya #ticker:COOP and Standard Chartered Bank #ticker:SCBK are the latest top lenders to report drops in profits for the nine months to September due to loan default losses in the wake of Covid-19 economic hardships.

Standard Chartered Bank profit dropped 30.4 per cent to Sh4.3 billion while those of Co-operative net earnings fell 10 per cent the nine months to Sh9.77 billion.

Both banks were hurt by the sharp rise provisions related to defaults on the effects of the Covid-19 crisis, which triggered layoffs, job cuts and the collapse of businesses.

Standard Chartered loan loss provision jumped 3.7 times to Sh2.7 billion in response to gross defaults rising 10.2 per cent to Sh21.9 billion. Cooperative Bank loan loss provisioning rose 89.4 per cent to Sh4.02 billion.

Co-op managing director Gideon Muriuki said the rise in provisions was in appreciation of the challenges that businesses and households are grappling with due to Covid-19 disruptions.

Other tier-I lenders have also seen drops in net profits with that of Absa Kenya falling by 65.4 per cent as that of Equity Bank and KCB Group reduced by 43.1 per cent and 14.5 per cent respectively majorly on higher provision for defaults.

Co-op Bank net interest income, however, rose by 11.8 per cent to Sh23.64 billion during the period as the bank expanded lending by six per cent to Sh284.23 billion. The bank has so far restructured loans valued at Sh46 billion or 16.2 per cent of the loan book to accommodate customers seeking flexible options such as longer repayment period.

The impact of Covid-19 has hit bank profits amid a spike in defaults, setting the stage for lenders to issue profits warnings.