Capital Markets

Banks post record Sh46bn gross profits in first quarter

CBK

Central Bank of Kenya Governor Patrick Njoroge. FILE PHOTO | DIANA NGILA | NMG

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Summary

  • Commercial banks’ quarter one pre-tax profits jumped 19.5 percent to a record Sh45.9 billion, defying an overall economic downturn due to the Covid-19 pandemic.
  • A survey by the Central Bank of Kenya (CBK) shows that the lenders made an extra pre-tax profit of Sh7.5 billion in the three months to March compared to a similar period in 2020 when total profits stood at Sh38.4 billion.

Commercial banks’ quarter one pre-tax profits jumped 19.5 percent to a record Sh45.9 billion, defying an overall economic downturn due to the Covid-19 pandemic.

A survey by the Central Bank of Kenya (CBK) shows that the lenders made an extra pre-tax profit of Sh7.5 billion in the three months to March compared to a similar period in 2020 when total profits stood at Sh38.4 billion.

The pre-tax profits the banks posted in the first quarter of this year is almost double the Sh23.6 billion that was realised in the preceding three months to December.

The January-March 2021 performance comes as a major relief for the sector which last year took a Sh46 billion hit on its profits to Sh112.8 billion, down from Sh159.1 billion in 2019.

This was attributed to increased bad loans leading to higher provisions as the pandemic weighed on business revenues and the economy leading to job cuts.

The CBK survey shows the quarter’s profitability has been helped by a sharp drop in new provisions due to a drop expected in loan losses and recovery efforts, despite slow growth in interest income.

“Quarterly profit before tax increased by Sh22.3 billion from Sh23.6 billion in December 2020 to Sh45.9 billion in March 2021. This was as a result of a higher decrease in expenses (22.8 percent) as compared to a decrease in income (4.6 percent),” the survey stated.

Return on assets increased to 2.7 percent in March 2021 from 1.6 per cent in December 2020.

The report shows demand for credit has remained unchanged in the quarter.

However, the lenders expect to register growth on loans books for sectors such as personal and household, trade and manufacturing sectors.

In January, CBK reinstated cash transfer charges between banks accounts and mobile money wallets that had been put in place to cushion Kenyans from the effects of Covid-19.