A KCB bank branch in Nairobi. Kenya’s largest bank, the KCB Group, has reported a 40 per cent drop in net profit for the first half of the year, hit hard by the Covid-19 pandemic.
This is after the lender posted Sh7.6 billion in after-tax profits for the first six months of 2020, marking a 40 per cent decline from the Sh12.7 billion reported last year.
The lender attributed the dip to increased provisions in the wake of higher credit risk due to the Covid-19 pandemic.
KCB boss Joshua Oigara said the March to June period has been the most difficult quarter for nearly ten years at the bank, describing the provisions the lender has been forced to make as ‘catastrophic’.
"This has been catastrophic. Never have we seen our provisions increase from an average of Sh3 billion to more than Sh11 billion," Oigara said.
Banks make provisions for bad debts when they realise that some of their customers may not be able to repay their loans as earlier planned.
"Because we have seen weaknesses in customers behaviour and customers repayment, we have seen a strong increase in our provisions," Oigara said. He said the cost of risk has risen by four times from 1 percent to 4 percent.
"The second quarter was the toughest in our recent history as the pandemic hurt economic activity across markets. Most of the key sectors were nearly shut down and our customers continue to face unprecedented challenges," Oigara said in a statement.
He said when the virus hit home in March, the bank made a commitment to look after its customers, staff and other stakeholders while pursuing business continuity.
"We intend to keep on this promise even under the current worsening operating environment," said Mr Oigara.
In response to the pandemic, KCB Group has instituted a raft of interventions to cushion and support key stakeholders such as customers and employees.For the period under review, the Bank restructured facilities worth Sh101 billion to cushion customers against the effects of the crisis.The debt-relief measures have seen customers apply for their loans to be restructured, credit lines expanded and loan tenures extended to keep them financially afloat. KCB has also waived fees associated with loan restructuring and those for mobile transactions below a thousand shillings.But all was not lost.The silver lining was in its operating income which grew by 17 per cent to Sh45 billion in the period compared to Sh38.6 billion in June 2019.Net […]