Capital Markets

Listed banks increase provisions by Sh21 billion as defaults increase

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StanChart has raised its coverage of bad loans by the largest margin of 193.5 percent to Sh1.8 billion. FILE PHOTO | NMG

Kenya’s listed banks raised their provisions for bad debt by 46 percent to Sh69 billion, a move that contributed to slowing down their earnings in the nine months ended September.

The institutions –Equity Group, KCB Group, Co-operative Bank of Kenya, NCBA Group, DTB Group, I&M Group, Absa Bank Kenya, Standard Chartered Bank Kenya, HF Group and Stanbic Bank (the main subsidiary of Stanbic Holdings)— had combined provisions of Sh69 billion in the review period.

The amount rose from Sh47.25 billion a year earlier, with the lenders responding to a 32.6 percent jump in defaults to Sh583.9 billion in an environment characterized by rising interest rates and high cost of living as well as doing business.

The 10 Nairobi Securities Exchange-listed banks saw their net profit rise 7.3 percent to Sh142.6 billion. There were major differences in provisions and defaults among the institutions, with StanChart raising its coverage of bad loans by the largest margin of 193.5 percent to Sh1.8 billion.

This was despite the bank’s gross loan defaults declining by nearly two percent to Sh23.55 billion, indicating increased conservatism.

Despite the increase in provisions, StanChart managed to post one of the highest earnings growth of 11.7 percent to Sh9.7 billion, benefitting from the momentum built earlier in the year. It was followed by KCB whose loan loss provision increased 118 percent to Sh15.8 billion. The bank’s stock of bad debt had risen 25.2 percent to Sh187 billion.

The bank saw its net income fall 1.7 percent to Sh29.9 percent, becoming the only other lender to post lower profit besides HF whose bottom line shrunk 73.4 percent to Sh61 million.

Equity was third in raising its provisions by 96.5 percent to Sh18.9 billion as the size of its bad loans swelled 83.4 percent to Sh124.4 billion.

The bank nevertheless grew its net profit by 3.6 percent to Sh34.5 billion.

Domestic economic shocks fueled by a multiplicity of state taxes, levies, high-interest rates and depreciation of the shilling continue to weigh heavily on households and businesses, reducing disposable income and spending power.

The latest monthly survey by Stanbic Bank, a member of the Standard Bank of South Africa shows that Kenya’s business conditions remained in a steep decline halfway through the final quarter of the year amid sizable falls in output, new orders and employment.

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