Commercial banks lost Sh19.48 billion in the six months to end of June as Covid-19 economic disruption forced lenders to increase provisions for debt defaults, hurting the profitability of the sector.
Analysis of the half year results for 36 out of the 39 banks that were actively trading in the review period shows that combined net profit dropped by 30.5 percent to Sh44.44 billion in contrast with Sh63.92 billion in the preceding similar period.
The slow performance came in the period of slowed economic activities and increased debt defaults as Kenya imposed strict measures to control the spread of Covid-19.
Commercial banks lost Sh19.48 billion in the six months to end of June as Covid-19 economic disruption forced lenders to increase provisions for debt defaults, hurting the profitability of the sector.
Analysis of the half year results for 36 out of the 39 banks that were actively trading in the review period shows that combined net profit dropped by 30.5 percent to Sh44.44 billion in contrast with Sh63.92 billion in the preceding similar period.
The slow performance came in the period of slowed economic activities and increased debt defaults as Kenya imposed strict measures to control the spread of Covid-19.
The value of bad loans in the banking sector rose by Sh29.95 billion between March and June alone showing the intensity of economic hardship facing borrowers due to increased layoffs and salary cuts.
Kenya’s top seven banks listed on the Nairobi Securities Exchange #ticker:NSE (NSE) have set aside Sh31.7 billion in half year to June, being 3.5 times the Sh9 billion that had been provisioned in the preceding similar period.
KCB Group #ticker:KCB, Equity Group #ticker:EQTY and Absa Bank Kenya #ticker:ABSA are among the lenders that raised their provisions for bad debt by the largest amounts at Sh7.9 billion, Sh7.1 billion and Sh3.7 billion respectively.
Kenya reported its first Covid-19 case on March 13 forcing the state to impose curfew, closed schools, hotels, bars and restaurants and introduced social distancing rules.
Seven lenders— Bank of Africa, Mayfair, Spire, Consolidated, Housing Finance, Sidian and DIB Kenya— posted losses during the period that saw only nine banks grow profits.
Top lenders such as KCB, Equity, Cooperative Bank, Standard Chartered Bank Kenya #ticker:SCBK and Absa Kenya all shed profits as they set aside increased amounts of money to reflect rising loan defaults in the economy.
Lenders such as Absa, SBM Kenya, Development Bank of Kenya and Ecobank posted declines of more than 50 percent in their bottom-lines.
A few medium and lower tier lenders like Bank of Baroda, Family Bank, Guardian, Guarantee Trust, ABC, Paramount Citi Bank Kenya and UBA defied the trend to post growths in their profits.
The banking sector results are in line with the Central Bank of Kenya indicative figures that had shown that pre-tax profit for four months to April had dropped by 20.2 percent to Sh45.3 billion.
April, the first full month of Covid-19 impact, was particularly worse, with banks posting a 46 percent decline in combined pre-tax profit to Sh6.9 billion.
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Note: The results are not exact but very close to the actual.
