Kenya Commercial bank (KCB) branch at Kipande House along Kenyatta Avenue, Nairobi Banks’ pretax profits for 10 months to October last year grew by 63.7 per cent on the back of increased lending and reduced loan defaults.
Fresh data from the Central Bank of Kenya (CBK) shows the earnings grew to Sh161.9 billion from the Sh98.9 billion posted in a similar period last year.
The earnings, which were higher than the Sh112.8 billion that was booked in 2020 full-year, signals that record profits are expected in March when lenders make public their full-year performance for 2021.
Investors also expect dividends with chief executives of banks such as KCB, Equity, Absa and NCBA having said in November that there would be no reason to withhold payouts with such growth momentum. The latest CBK data means banks were on average making Sh16.19 billion monthly compared to 2020 when they averaged Sh9.89 billion in an environment where Covid-19 control measures such as curfews and lockdowns were at the peak.
Banks have enjoyed increased lending and reduced loan defaults as customers stepped up repayments on the softening of coronavirus-induced economic fallout.
The industry loan book grew by Sh226.9 billion to Sh3.226 trillion during the review period in which banks’ average interest rate was 12.12 per cent. The latest profits are also above the Sh159.9 billion that banks made in the year ended December 2019, meaning that lenders have now beaten their pre-pandemic performance.
While banks expanded their loan book by 7.6 per cent in the review period, gross loans in defaults rose by 3.7 per cent to Sh439.6 billion.
Banks’ asset quality, measured by the proportion of loan book that was in default, improved from 14 per cent in June and has been coming down, closing October at 13.6 per cent, same as September.
The sectors’ 10-month profits are in line with the results reported by Equity, KCB, Cooperative, Standard and Absa in the third quarter ended September 2021.