Equity Bank #ticker:EQTY has extended repayment periods on a third of its loan book by three years to cushion customers hard hit by the coronavirus pandemic.
Equity Bank Group Holdings ceo James Mwangi said they offered the extended loan moratoriums to 35 per cent of their loan book beyond the one year allowed by the regulator to help customers recover.
As at September 2020 Equity’s loan book stood at Sh302.4 billion, which puts the loans given an extended repayment holiday at about Sh105.8 billion.
“We offered up to 45 per cent of all the lending we have a repayment moratorium of up to three years depending on how we perceived. Only 35 per cent of our customers have exercised that option,” Dr Mwangi said on Wednesday.
Last year the Central Bank of Kenya allowed lenders to extend loan repayment for a year to help households and businesses cope with reduced revenues during the pandemic.
Most restructuring have been in form of moratoriums on principals and interes followed by renegotiated terms, including maturities, interest rates and fees and a tiny portion of interest rate freeze.
As the moratorium expires, businesses whose loans have been restructured are seen taking a while before get into full production.
Lenders foresee a prolonged recovery for most firms, with some shutting down permanently.
CBK said customers extended repayment periods on loans worth Sh1.63 trillion by end of December, an equivalent of 54.2 per cent of total loan book.
Borrowers defaulted on Sh73.05 billion bank loans in 10 months to December alone, highlighting the gravity of the Covid-19 induced economic hardship that triggered massive layoffs and pay cuts.
The defaults have seen the non-performing loans (NPLs) ratio rise to 14.1 per cent—the highest since August 2007—when it stood at 14.41 per cent.The value of loans defaulted hit Sh423 billion or 14.1 per cent of the total Sh3 trillion loan book, representing a sharp rise from Sh351.73 billion that was in default by the end of March 2020. The Sh73.05 billion rise in defaults between end of February and December is a stark contrast to an additional Sh5.4 billion that fell into default status in a similar period in 2019 and Sh31.1 billion in 2018.