Equity Bank’s Chief Executive Officer James Mwangi in Nairobi, Kenya November 11, 2020. Picture taken November 11, 2020. Kenya’s largest banks reported strong earnings for 2021 driven by write-backs, but the Russia-Ukraine war, inflation and upcoming elections may narrow margins going forward.
Kenyan banks reported stellar earnings growth for 2021, driven by strong credit growth, M&A and high transaction fees.
But the sector’s underlying performance may be skewed given a significant drop in loan impairment charges in 2021 and subsequent write-backs, which boosted bank balance sheets and results, say some analysts.
“43% of tier one banks net earnings for 2021 were a result of write-backs,” says George Bodo, director at Callstreet Research and Analytics, an investment and market research platform based in Nairobi. While an asset is written off once its value has depreciated, an asset can “written-back” or put back on the balance sheet when its value increases again.
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