Equity Bank #ticker:EQTY has restructured Sh92 billion of loans, equivalent to about 25 percent of its net loans at the end of last year, as the lender seeks to cushion customers who have been hit by the coronavirus crisis.
The relief, which is being determined on a case-by-case basis, also includes an extension of loans terms to cut monthly instalments as well as repayment breaks on the full or part of the credit.
The lender is the sixth top bank after KCB Group #ticker:KCB, Absa Kenya #ticker:KCB, Co-operative Bank #ticker:COOP, NCBA Group #ticker:NCBA and StanChart #ticker:SCBK to disclose the impact of the health crisis on its loan book after the Central Bank of Kenya (CBK) a loosened the loan repayment rules last month.
“Clients who can demonstrate the impact of Covid-19 on their businesses and soundness of their business model in the new normal will get a reprieve of loan rescheduling and refinancing with up to an additional three years of repayment,” said Equity Bank chief executive James Mwangi.
“We believe that by supporting our existing clients, we shall help them keep their supply chains open and functional while maintaining their employees on their jobs.”
World Bank expects Kenya’s economic growth will slow down to 1.5 percent this year or contract one percent in the worst-case scenario as the virus saps demand from trading partners like Europe as well as disrupt supply chains and domestic production.
This has led to layoffs, reduced cash flow for businesses and forced unpaid leaves, setting the stage for loan defaults.
Equity Bank did not comment on the potential impact of the loan restructuring on its earnings this year.
The lender’s net profit increased 13.8 percent from Sh 19.82 billion in December 2018 to Sh22.56 billion in the year ended 2019. It is yet to release quarter one financial results.
The CBK said loans worth Sh273 billion had been restructured between mid-March and end of April.
KCB said it had restructured loans worth Sh110 billion, Absa had done Sh8.3 billion by the end of April while StanChart had by start of May reviewed credit worth Sh8 billion.
NCBA Group said on Wednesday it had restructured loans worth Sh35 billion since the start of the coronavirus pandemic.
Apart from allowing lenders to offer relief to distressed borrowers, the Central Bank has also cut lending rates and lowered the ratio of cash that commercial banks are required to hold.