Leading banks shrug off pandemic blues to record high earnings in first quarter

Sunday June 05 2022
KCB Bank.

Customers at a KCB bank in Nairobi on April 1, 2010. PHOTO | FILE | NMG


Top regional banks shrugged off the effects of the Covid-19 pandemic to post high dividends and reduce loan loss provisions in the first quarter of this year.

The banks had strong earnings despite rising inflation and dollar shortages, even though macroeconomic indicators point to a slowing economy later in the year.

Kenya Bankers Association (KBA) said the economic recovery recorded in 2021 risks being slowed down this year by the adverse effects of unfavourable weather, surging fuel prices and the country’s General Election on August 9.

In a research note dated May 24, 2022, KBA also said increased lending risk and rising inflation would slow down loan disbursement to households and to the productive sectors of the economy.

“Despite the recovery, there are emerging downside risks for growth in 2022,” said KBA.

“The ongoing electioneering process could potentially slow down business activities as investors typically adopt a wait-and-see approach to their investment decisions.”


However, a review of the unaudited financial statements of selected lenders with regional operations shows growth in profits buoyed by huge cuts in loan impairment charges, even as industry data indicates a surge in the number of non-performing loans (NPLs).

The industry’s ratio of gross NPLs to gross loans was 14 percent in February, up from 13.1 percent in December last year.

In the three months to March 31, KCB Group cut loan loss provisions by 27.5 percent to Ksh2.07 billion ($17.84 million) from Ksh2.86 billion ($24.65 million), despite its NPLs continuing to come under pressure due to slow recovery in the construction, hospitality and part of the manufacturing sectors. This caused a deterioration from 14.8 percent to 17 percent.

KCB’s net profit grew by 54 percent to Ksh9.78 billion ($84.31 million) from Ksh6.37 billion ($54.91 million), and investments in government securities increased by 32.6 percent to Ksh281.8 billion ($2.42 billion) from Ksh212.5 billion ($1.83 billion).

Rise in net profit

Bank of Kigali (BoK) which is cross-listed on the Nairobi Securities Exchange posted a 40 percent growth in net profit to Rwf15.6 billion ($14.97 million) from Rwf11.2 billion ($10.75 million). Net loan loss provisions dropped by 82.3 percent to $2 million, from $11.4 million

Co-operative Bank increased its net profit by 68.85 percent, buoyed by a deferred tax financial gain of Ksh306.97 million ($2.64 million) and a 32 percent loan loss reduction.

The lender’s profit after tax rose to Ksh5.83 billion ($50.25 million) from Ksh3.45 billion ($29.74 million) in the same period last year.

This was largely boosted by a Ksh737.8 million ($6.36 million) reduction in loan impairment charges and a $2.64 million financial gain related to deferred tax.

I&M Group’s net profit rose by 43 percent to Ksh2.56 billion ($22.06 million) from Ksh1.79 billion ($15.43 million), with loan loss provisions reducing by 36.65 percent to Ksh480.74 million ($4.14 million), from Ksh758.91 million ($6.54 million).

Diamond Trust Bank Group posted a 12 percent growth in net profit to Ksh2.17 billion ($18.7 million), from Ksh1.94 billion ($16.72 million), after reducing loan impairment charges by 15 percent to Ksh582.04 million ($5.01 million), down from Ksh684.25 million ($5.89 million).

Equity Group Holdings (EGH) Ltd posted 36 percent growth in net profit its profit to Ksh11.9 billion ($102.58 million) from Ksh8.7 billion ($75 million) during the period under review

The lender increased its investment in Government securities by 50 percent to Kshs.389.4 billion ($3.35 billion) from Ksh.258.9 billion ($2.23 billion).

Equity increased its loan loss provisions by 25 percent to Ksh1.4 billion ($12.06 million) from Ksh1.1 billion ($9.48 million).

In 2020, the International Monetary Fund cautioned banks against paying dividends to shareholders, saying the lenders needed to preserve cash to boost resilience against pandemic related shocks.

Standard Chartered Bank Kenya boosted its earnings by booking a negative provision for loan losses with hopes of an economic turnaround.

The lender recorded a negative loan loss provision of Ksh86 million ($741,379.31) leading to a 15.48 percent growth in net profit to Ksh2.76 billion ($23.79 million) from Ksh2.39 billion ($20.6 million) in 2020.

Absa Bank Kenya cut its loan loss provisions by 15 percent to Kshs.1.2 billion ($10.34 million), leading to a 22 percent growth in net profit to Ksh3 billion ($25.86 million).