Kenya Commercial Bank Group CEO Joshua Oigara. PHOTO | FILE | NMG From a business growth and revenue growth perspective, the pandemic has affected major macroeconomic drivers, reducing all economic activities.
This made credit quality deteriorate significantly across all segments and banks, which have traditionally been the providers of credit have been badly affected.
Kenya Commercial Bank Group chief executive Joshua Oigara spoke to Njiraini Muchira on the bank’s performance for nine months ending September, whose results were released last week.
KCB has posted a 43 per cent decline in profit. What challenges, besides Covid-19 is the bank facing this year?
Every sector of the economy has been affected by Covid-19, including KCB. For that reason, performance was affected by an increase in non-performing loans (NPLs) and in loan provisions. From a business growth and revenue growth perspective, the pandemic has affected major macroeconomic drivers, reducing all economic activities. This made credit quality deteriorate significantly across all segments and banks, which have traditionally been the providers of credit have been badly affected.
Did you anticipate such a huge drop?
This has been a unique year, but a 43 per cent decline in profitability is a better performance in light of the crisis. In March, we forecast that results would be down by 75 per cent year-on-year.
We are actually ahead of our expectations. This is a year of survival, of supporting clients and people to come out of a crisis. Profit is not the priority at this time.
Does increase in NPLs reflect how bad the business environment has been?
The banking sector is the heartbeat of performance of businesses. Key sectors (hotels, eateries, airlines, education, traders, importers and hospitals) have slumped. This is why we restructured $955 million worth of loans over the difficult macroeconomic activity. What will happen with the second big wave? However, our results include a focus of the deteriorating environment heading to the end of the year. The credit quality is reasonable and the 15.2 per cent increase in NPLs is based on the difficulties in the market mainly driven by Covid-19 and a difficult macroeconomic driver. We don’t anticipate more loan restructuring but a number of these loans could still be extended by another six months up to March of 2021.
Are government securities the most viable option for banks currently? The increase reflects the reality of the moment. With a lot of liquidity […]