NAIROBI, Aug 13 – KCB Group, Kenya’s biggest bank by assets, expects the proportion of loans it will restructure due to effects of the novel coronavirus to hit 25% of its total loans by December, its chief executive officer said on Thursday.
The bank said on Wednesday its first-half after-tax profit fell 40% to 7.6 billion shillings ($70.31 million), while pretax profit also slid 28% to 12.82 billion shillings due to increased provisions occasioned by higher credit risk due to the COVID-19 pandemic.
It said by end June, it had restructured 101 billion shillings worth of loans, which Chief Executive Officer Joshua Oigara said was 20% of its total loans of 560 billion shillings.
“We still have a couple of numbers coming along between now and the end of the year. But 25% is what we estimate will be restructured by December,” he told Reuters in an interview.
The central bank in Kenya and other countries where KCB Group is operating allowed lenders to offer relief, such as restructuring loans and rescheduling payments, to distressed customers starting in mid-March after the first COVID-19 cases were reported in the region.
Despite the bank’s drop in profits, it said its net interest income was up 22% in the first half, and its net loans and advances were up 17%.
Oigara attributed the growth in loans to activity in the first quarter of the year, and said the bank forecast a 10% growth year on year in the second half.
The bank’s ratio of non-performing loans to total loans rose to 13.7% from 7.8% a year earlier, mainly due to the consolidation of the National Bank of Kenya – which it acquired last year – and increased defaults due to the pandemic.
Oigara said he expected the ratio to peak there.
“We anticipate that is really our target for the year now. So we are not expecting any major changes between now and year-end,” he said.
Oigara added the bank had no plans to lay off staff as part of cost-cutting measures.At 1018 GMT, KCB Group’s shares were down 5.07% to trade at 30.90 shillings. (Reporting by George Obulutsa; Editing by Omar Mohammed and Jacqueline Wong)
