Kenyan banks are expected to hoard cash as they report a jump in first-quarter loan-loss provisions to cope with the aftermath of the coronavirus pandemic. Kenyan banks are expected to hoard cash as they report a jump in first-quarter loan-loss provisions to cope with the aftermath of the coronavirus pandemic.
Kenyan institutions got a cash boost when the central bank lowered reserve requirements to free up funds for lending, while interest rates have been cut to a nine-year low. Banks have now started restructuring debt for customers hard hit by a drop in business activity because of lockdown-measures aimed at slowing the spread of Covid-19. Banks will hold excess cash reserves, so as to cushion themselves from unforeseen shocks “Banks will hold excess cash reserves, so as to cushion themselves from unforeseen shocks,” said Martin Kirimi, a senior associate for research at Nairobi-based Standard Investment Bank.
KCB Group Ltd., Kenya’s biggest bank by assets, has reorganized 80 billion shillings (R13,88 billion) of loans, primarily by offering a moratorium of about three months on interest and principal to borrowers affected by the pandemic. Standard Chartered Bank Kenya Ltd. has restructured more than 8 billion shillings (R1,3 billion) of loans. Absa Bank Kenya Plc said on April 14 it had rejigged 8.3 billion shillings of debt.
The Nairobi-based unit Standard Bank Group Ltd., Africa’s largest lender, kicks off the first-quarter earnings round on Friday, followed by KCB Group Ltd. on May 19.
“We expect a significant increase in loan-loss provisions, skewing the cost of risk upwards,” African Alliance said in a note. Write-offs will also jump as “the pandemic accelerates structural shifts in the economy.”
Almost two-thirds of lenders operating in East Africa’s biggest economy expect the bad loans ratio to rise to 14% from 12.4%, according to a survey released this week by the Kenya Bankers Association, the industry lobby group. Banks are adopting defensive strategies; implying that the appetite of growing risk-weighted assets has greatly waned “Banks are adopting defensive strategies; implying that the appetite of growing risk-weighted assets has greatly waned,” according to Standard Investment Bank’s Kirimi. Lenders are stacking up on term-auction deposits, government securities and the interbank market “to try and buttress the top line.”
Moody’s Investors Service cut its outlook for KCB, Equity Group Holdings Ltd. and Co-operative Bank of Kenya Ltd. to negative from stable this week because their holdings of government debt has now tied them to the fortunes […]
