Commercial banks’ profit before tax for the first four months of 2019 rose by 15 percent to Sh56.8 billion up from Sh49.4 billion on increased lending, fresh data by the Central Bank of Kenya (CBK) shows.
According to the regulator’s report, customer deposits shrunk slightly to Sh3.37 trillion from Sh3.4 trillion as at March.
Cumulative loan book for the sector grew to Sh2.6 trillion, the highest point in the country’s history, buoyed a relatively calm economy.
The jump in earnings comes at a time when credit growth to the private sector improved to 4.9 percent, the highest level since introduction of the rate cap law that has dragged economic growth by stagnating cash lent to businesses at below four percent, thus falling short of the recommended 12 percent.
Analysis of lenders’ financial statements as at the end of the first quarter put Equity Bank #ticker:EQTY at pole position as Kenya’s most profitable lender ahead of KCB #ticker:KCB.
The James Mwangi-led lender netted Sh6.19 billion in the quarter against KCB’s Sh5.77 billion.
Despite the rosy results in the sector, non-performing loans (NPL) rose to an all-time high of Sh345 billion in the period to March, putting the NPL ratio at 13.5 percent, underlining struggles individuals and businesses face in servicing their debts.
The effect of the tough environment their customers are facing is in the short-term, manifested in the rising gross NPLs and not necessarily in the top-line.
However, in the long-run, if the current situation persists, we could see declines in the bank’s revenue,” said Harrison Gitau, head of research at stockbrokerage company Apex Africa in an earlier statement.
The banking sector liquidity ratio stood at 51 percent at the end of April, which is the highest level since May 2017. It stood at 49.1 percent at the beginning of the year.