After a period of reduction in net earnings, mass layoffs and freezing of dividends in 2020, Kenyan lenders have suddenly bounced back amid modest growth in revenues and reduction in operating expenses.
So far six top tier banks which have published their financial performance figures for the 12 months to December 31, posting on average over 80 percent growth in net profit.
The EastAfrican has learnt that inside the glittering profit numbers are huge write-backs on loan loss provisions which were aggressively provided for by bank managers seeking to take advantage of the Covid-19 shocks to clean up their bad books in 2020.
Kenya’s banking sector is upbeat as top banks announce huge profits and record dividend payout to shareholders for the year ended December 31, in an economy struggling to regain its footing following the Covid-19 pandemic shocks.
After a period of reduction in net earnings, mass layoffs and freezing of dividends in 2020, Kenyan lenders have suddenly bounced back amid modest growth in revenues and reduction in operating expenses.
So far six top tier banks which have published their financial performance figures for the 12 months to December 31, posting on average over 80 percent growth in net profit.
These are Absa Bank Kenya which recorded the highest jump in net profit by 161 percent, followed by Equity Bank (99 percent), KCB (74 percent), Standard Chartered Bank Kenya (66 percent), Co-operative bank (53 percent) and Stanbic Holdings Ltd (39 percent).
The EastAfrican has learnt that inside the glittering profit numbers are huge write-backs on loan loss provisions which were aggressively provided for by bank managers seeking to take advantage of the Covid-19 shocks to clean up their bad books in 2020.
This is process of restoring to profit a provision for bad or doubtful debts previously made against profits and no longer required after the loan starts to perform.
“There are two things at play here. The implementation of the International Financial Reporting Standard (IFRS9) provided that banks should have more forward looking provisions for bad and doubtful debts which was to happen as from the end of 2019. So when Covid-19 came into play, you realise that banks had a dip in profitability because they were very aggressive in their provisioning,” an industry insider who didn’t want to be named told The EastAfrican.
“So many of the banks took advantage of the slowdown in economic growth during the Covid-19 period to […]
