East Africa: Regional Lenders Slake Govts’ Appetite for Short-Term Funds

East Africa: Regional Lenders Slake Govts' Appetite for Short-Term Funds

East Africa’s top retail banks are cashing in on interest income on government securities and readjustment of loan loss provisions to crawl back to profitability in the midst of the third wave of Covid-19 pandemic that is impacting banking transactions and loan books.

A review of the unaudited financial statements for KCB, Equity Bank, Cooperative Bank, NCBA and Diamond Trust Bank (DTB) shows increased revenues derived from investment in government securities during the three months period to March 31, with non-funded (non-interest) income from banking transactions, save for Equity bank, declining across the board.

During the period Equity Group Holdings (EGH), the region’s largest lender by market capitalisation (Ksh1.06 trillion; $9.64 billion) announced a rebound to their pre-covid-19 period performance with a 64 percent jump in net profit to Ksh8.7 billion ($81.3 million) from Ksh5.3 billion ($49.53 million) in the same period last year (2020).

The growth in profit was helped by a 59 percent (Ksh1.85 billion; $16.82 million) reduction in loan loss provisions.

The lender was also able to generate Ksh2.55 billion ($23.83 million) from banking transactions and Ksh3.4 billion ($31.77 million) from lending business according to the unaudited financial statements.

Its regional subsidiaries save South Sudan also made positive contribution to the bottom-line. "We have adopted a two-pronged strategy: offensive and defensive. We strengthened our capital buffers by retaining profits and withholding dividend payouts, took long-term loan facilities that strengthened our liquidity buffers," said James Mwangi, the group’s chief executive

The lender which is listed on the Nairobi Securities Exchange has operations in six countries — Kenya, Uganda, Tanzania, Rwanda, South Sudan and Democratic Republic of Congo — with a commercial representative office in Ethiopia.

KCB Group Plc recorded 1.8 percent growth in net profit to Ksh6.37 billion ($59.53 million) from Ksh6.26 billion ($58.5 million) in the same period last year, after retaining loan loss provisions unchanged at Ksh2.9 billion despite growth in bad loans.

Group CEO Joshua Oigara said overall performance was impacted by lower non-interest income due to subdued digital lending on reduced disbursements and lower customer transactions.

Operating income increased marginally by 0.38 percent to Ksh23.04 billion ($209.45 million) from Ksh22.95 billion ($208.64 million) as non-funded income declined by 20 percent due to slowdown in the digital lending and service fees waivers in Kenya to cushion customers from the pandemic.

Non-performing loans The lender retained loan loss provisions at Ksh2.9 billion ($27.1 million) even as the stock of non-performing loans (NPLs) increased by […]

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