Banking sector earnings jump by 63pc as loan repayment improves

Banking sector earnings jump by 63pc as loan repayment improves

Business arrow graph chart shows business success. [Getty Images] Banks’ pretax profits for the nine months to September grew by 63.1 per cent, overtaking 2020 full-year earnings on the back of increased lending and reduced loan defaults.

New data from Central Bank of Kenya (CBK) shows the earnings hit Sh145.48 billion in the review period, up from Sh89.2 billion that was posted in a similar period last year.

CBK said in the credit survey report that banks made Sh49.08 billion in the third quarter ended September to add to Sh50.53 billion and Sh45.9 billion that had been made in the second and first quarter respectively. READ MORE

The profits surpassed last year’s full-year earnings by Sh32.68 billion, pointing to increased lending and falling loan defaults as borrowers step up repayments and lenders intensify recovery through auctions.

The latest profits are also above the Sh125.3 billion that banks made in nine months ended September 2019, meaning that they have now beaten pre-pandemic levels.

The sectors’ profits are in line with the results reported by big lenders such as Equity Group, Standard Chartered Bank Kenya and KCB.

Equity Group third-quarter net profit jumped 78.6 per cent to Sh26.8 billion, surpassing the profits it made in the full year ended December 2020.

Standard Chartered reported a 46.6 per cent net profit growth to Sh6.3 billion in the nine months, prompting its board to declare an interim dividend of Sh5 per share.

CBK said personal and household borrowings as well as by businesses led in growing the loan book.

“Perceived demand for credit increased in personal and household, trade and manufacturing sectors. This is attributed to the ongoing normalcy of economic activities,” said CBK.

Banks’ asset quality, measured by the proportion of loans in default, improved from 14 per cent in June to 13.6 per cent in September.The improved asset quality was attributed to a 2.7 per cent increase in gross loans to Sh3.19 trillion, which was higher than a 0.09 per cent increase in non-performing loans to Sh434.28 billion.Banks have been cutting the money set aside for loan defaults, with many citing improving economic health for borrowers who had failed to keep up with repayments at the peak of the coronavirus disruptions.The September credit survey report shows majority of banks (41 per cent) expect loan defaults to fall in the quarter ending December, while 33 per cent expect the defaults to remain unchanged."This is attributed to enhanced recovery efforts being […]

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