CBK data show that lenders recorded a profit before tax of Sh96.4 billion in the first half of this year. Local banks have in the last week been releasing their financial results for the first half of 2021, and the growth in their profitability at a time when the country is still grappling with the Covid-19 pandemic has stuck out like a sore thumb.
Rather than killing banks, the pandemic seems to have made them stronger. Slightly over a year since Kenya recorded its first case of Covid-19, banks appear to be on steroids .
KCB Bank more than doubled its net profits to Sh15.3 billion in the first six months of the year, compared to a profit after tax of Sh7.6 billion in the same period last year. READ MORE
Equity Bank nearly doubled its profit after tax, which jumped by 98 per cent to Sh17.9 billion compared to a net profit of Sh9.1 billion by end of June 2020.
Co-operative Bank, another large lender that has already released its results, might not have posted huge profits but the trend, going by data on profit before tax captured by Central Bank of Kenya (CBK) in the first five months, points to unprecedented growth for banks.
CBK data show that lenders recorded a profit before tax of Sh96.4 billion in the first half of this year, a growth of 60.7 per cent compared to Sh60 billion that they made in the same period last year.
After a tumultuous 2020, bank shareholders, some of whom have gone for two years without getting a piece of the profits, are now positioning themselves for a bumper harvest.
So, where is the money coming from when the rest of the economy is just hankering on?
The truth is that the economy has started to show signs of recovery, but it is far from its pre-pandemic potential.
As the economy re-awakens and borrowers who had difficulties servicing their loans begin to repay their debts, billions of shillings that banks had set aside as insurance against possible defaults have been freed, swelling the lenders’ bottom lines.
This insurance cash is known as loan-loss provision. Where principal or interest is due and goes unpaid for 90 days, CBK requires banks to provision for it just in case the borrower defaults.Last year, not only did banks experience a surge in non-performing loans (NPLs) owing to a difficult economic environment — with many people losing their jobs […]
