- Mid and small sized lenders hardest hit by the defaults exacerbated by rate capping law.
The non-performing loans ratio among Kenyan lenders rose to a 10-year high in the third quarter of the year as commercial banks struggled with loan defaults in a tough economic environment.
The rise was mainly driven by business borrowers and has affected largely banks in tier 2 and 3, a research report by Standard Investment Bank showed.
Businesses in the country have struggled with a tough operating environment this year as credit growth ground to a halt on the back of a year-old rate capping law and a prolonged electioneering.
“NPL formation is continuing to defy management forecasts,” SIB said in the research report, adding that the introduction of new accounting rules under IFRS 9 in January 2018 could make it even harder for banks to manage their NPL levels.
I&M #ticker:I&M dislodged Diamond Trust Bank (DTB) #ticker:DTK as the lender with the lowest NPL to total advances ratio among listed banks at the Nairobi Securities Exchange (NSE), an analysis of their latest financial statements showed.
I&M’s NPL ratio barely changed at about five per cent in the first nine months of the year while DTB’s, which has for long had the lowest ratio among listed banks, jumped to seven per cent over the period, from a low of three per cent.
There was, however, a general deterioration of most lenders’ NPL ratio this year forcing them to provision more as an interest rate capping law that came to effect slightly over a year ago takes its toll on the sector.
Apart from the National Bank of Kenya (NBK) #ticker:NBK, whose financial woes over the years has made it have the worst NPL in the sector, mortgage lender Housing Finance (HF) #ticker:HFCK NPL jumped the most during the first three quarters of this year.
HF’s non-performing loans swelled in the first nine month of this year in what the company said last month was a “slowdown in the property market and overall unfavourable macro-economic conditions”.