East Africa’s top banks have defied the tough economic crisis of the pandemic to report a rise in profits. The resilience of top banks has been tested by mobile money transfer and rising defaults in loan repayments. Moreover, sluggish economic growth forced banks to freeze credit facilities available to the private sector. Mobile Money and Loan Repayments
In a bid to cushion Kenyans from the vagaries of the pandemic, Central Bank of Kenya (CBK) stripped mobile money transfer charges on telcos. Between March and November of 2020 customers stopped using debit cards, credit cards and prepaid charge cards in favor of mobile money payment platforms such as M-Pesa. Subsequently, Kenyan banks lost Ksh 1.26 billion in card repayments to mobile payment platforms.
CBK also restructured loan repayments to cushion borrowers from the effects of the pandemic. Borrowers were provided with various restructuring options including extension of repayment period, moratorium on principal or interest and waivers on interest or fees. Central Bank, in consultation with the banks, agreed on a one-year period from March 2020 to extend emergency measures to cushion borrowers from the economic effects of the coronavirus.
In Addition, private sector credit growth collapsed back 7.7 per cent in March 2021, the lowest rate since October. Banks have frozen new loan issues on renewed pandemic fears. According to the Central Bank of Kenya (CBK), net loans advanced by the banking industry shrunk to just Ksh.105 million during the month. The freeze in lending is attributed to unchanged demand for credit by businesses who may as well be staring at uncertainty during the pandemic. Perceived demand for credit decreased significantly in the real estate sector from the subdued demand for housing units. Impressive Q1 Results
Listed lender Equity Bank has recorded an after-tax profit of Ksh 8.7 billion in the first quarter of 2021. The result is a 64 percent increase from a profit of Ksh. 5.3 billion recorded in the same period last year. However, Equity avoided paying a dividend for a second year in a row. According to the lender, it was required to hold more capital after its deposits jumped by 53%.
Equity, which operates in six countries, saw its net interest income jump 23%. On the flip side, NCBA Bank’s net interest income surged 92%, The lenders increased provisions for bad loans in 2020 threefold and fivefold respectively, which drove last earnings lower. To grow income, NCBA Bank […]