Although Covid-19 pandemic has hit the entire banking sector equally, a few banks have emerged as more equal than others.
Consequently, financial results that lenders have been churning out in the last two quarters have presented observers with what would better be described as “a great study in contrast.”
Already, banks such as NCBA and Standard Chartered, anticipating a difficult 2021 have slashed their workforce even as they prepared to replace them with technology.
Others such as Co-operative Bank have unveiled a paperless account-opening process that besides offering convenience to customers, will also help curb the spread of coronavirus by avoiding face-to-face interaction.
Generally, an analysis of leading banks, reveals surprising results where institutions that had for long been regarded as models of cost management, reported dramatic declines in performance relative to their peers. Read More
Of the seven tier-one banks, NCBA and Absa suffered the most drops in profitability in the first nine months of 2020. The two banks reported a drop in profit before tax by 65 per cent and 59 per cent, respectively.
KCB’s profit before tax dropped by 37 per cent, Standard Chartered (28 per cent), DTB (24 per cent), Equity (20 per cent) and Co-operative Bank by 11 per cent.
NCBA and Absa seem to have been hit the hardest due to their client focus and outsized exposure to mainstream corporate business, which is the market segment that has been most hit by Covid-19 shutdowns.
On the other end, KCB and StanChart had to set aside a lot money as insurance against defaults as a consequence of being at the heart of Kenya’s large private sectors, including transport, hospitality, trade and horticulture. Unfortunately, these sectors have borne the brunt of severe Covid-19 disruptions.
DTB and Equity concentrate mostly on SMEs and consumer lending, which appear to have braved the disruption with reasonable success, and may be on a recovery path following the easing of lockdowns and related measures.
The difference in profitability lies in loan-loss provisioning, money that lenders set aside as insurance against possible loan defaults. KCB CEO Joshua Oigara during an interview at his office. However, the level of Covid-19-related provisioning that banks have undertaken to offer relief to their stricken borrowers has also exposed the efficiency, or lack of it, of existing credit risk analysis tools, according to a bank official who asked for anonymity as they are not allowed to speak to press.“That some banks had to provide for […]
