Customers wait to be served at a banking hall. FILE PHOTO | NMG Banks’ balance sheets look unfamiliar as lenders count the cost of setting aside large sums of money to absorb shocks of loan defaults.
According to a report, Kenya and Ghana are the countries where banks look to have done precautionary provisioning as judged by the 2020 loan charge-off compared with their five-year average charge-off.
Covid-19 pandemic has seen the world confront its biggest health crisis this century, posing one of the most disruptive periods to businesses, forcing banks to empathise with clients’ lost livelihoods and businesses by easing off on loan payment demands
Top East African banks increased provisions for bad debts by over $736 million last year (2020) to reduce exposure on household and business loans in countries ravaged by Covid-19 pandemic, affecting impacting profitability and returns to shareholders.
A review of the banks audited financial statements shows that top eight Kenyan banks by market share more than tripled their loan loss provisions to Ksh104.64 billion ($960 million) from Ksh28.68 billion ($263.11 million) in 2019.
Equity Bank, the largest lender in the region by assets ($9.35 billion) and market capitalisation ($1.44 billion) took the greatest hit on its net earnings after increasing its loan loss provision by Ksh21.6 billion ($198.16 million) to take care of the Ksh171 billion ($1.56 billion) worth of loans that had been restructured to bailout customers adversely affected by the pandemic. Study in resilience
As a result the lender increased its bad loans coverage by more than 89 percent.
“Our corporate purpose of ‘Transforming lives, giving dignity and expanding opportunities for wealth creation’ became the guiding compass of the organisation’s essence on how to navigate through the crisis and the challenging environment,” said James Mwangi, chief executive, Equity Bank group.
“Our results and performance became a human story of resilience and determination to live an ethical human purpose,” Dr Mwangi added.
Equity Bank was followed by KCB and NCBA banks which increased their loan loss provisions by Ksh18.62 billion ($170.82 million) and Ksh14.19 billion ($136.69 million) respectively.
Other Kenyan banks that significantly increased their loan impairments include Diamond Trust Bank (DTB) which grew its provisions by Ksh6 billion ($55.09 million), Co-operative Bank ($51.19 million), Absa Bank Kenya ($44.22 million), Standard Chartered Bank Kenya ($30.36 million) and I&M Bank ($16.88 million).“The Covid-19 pandemic has seen the world confront its biggest health crisis in this century, posing one of the […]