By JAMES ANYANZWA

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East Africa’s top retail banks are cashing in on interest income on government securities and readjustment of loan loss provisions to crawl back to profitability in the midst of the third wave of Covid-19 pandemic that is impacting banking transactions and loan books.

A review of the unaudited financial statements for KCB, Equity Bank, Cooperative Bank, NCBA and Diamond Trust Bank (DTB) shows increased revenues derived from investment in government securities during the three months period to March 31, with non-funded (non-interest) income from banking transactions, save for Equity bank, declining across the board.

During the period Equity Group Holdings (EGH), the region’s largest lender by market capitalisation (Ksh1.06 trillion; $9.64 billion) announced a rebound to their pre-covid-19 period performance with a 64 percent jump in net profit to Ksh8.7 billion ($81.3 million) from Ksh5.3 billion ($49.53 million) in the same period last year (2020).

The growth in profit was helped by a 59 percent (Ksh1.85 billion; $16.82 million) reduction in loan loss provisions.

The lender was also able to generate Ksh2.55 billion ($23.83 million) from banking transactions and Ksh3.4 billion ($31.77 million) from lending business according to the unaudited financial statements.

Its regional subsidiaries save South Sudan also made positive contribution to the bottom-line. “We have adopted a two-pronged strategy: offensive and defensive. We strengthened our capital buffers by retaining profits and withholding dividend payouts, took long-term loan facilities that strengthened our liquidity buffers,” said James Mwangi, the group’s chief executive

The lender which is listed on the Nairobi Securities Exchange has operations in six countries — Kenya, Uganda, Tanzania, Rwanda, South Sudan and Democratic Republic of Congo — with a commercial representative office in Ethiopia.

KCB Group Plc recorded 1.8 percent growth in net profit to Ksh6.37 billion ($59.53 million) from Ksh6.26 billion ($58.5 million) in the same period last year, after retaining loan loss provisions unchanged at Ksh2.9 billion despite growth in bad loans.

Group CEO Joshua Oigara said overall performance was impacted by lower non-interest income due to subdued digital lending on reduced disbursements and lower customer transactions.

Operating income increased marginally by 0.38 percent to Ksh23.04 billion ($209.45 million) from Ksh22.95 billion ($208.64 million) as non-funded income declined by 20 percent due to slowdown in the digital lending and service fees waivers in Kenya to cushion customers from the pandemic.

Non-performing loans

The lender retained loan loss provisions at Ksh2.9 billion ($27.1 million) even as the stock of non-performing loans (NPLs) increased by 48 percent to Ksh98 billion ($915.88 million) from Ksh66.2 billion ($618.69 million) in the same period last year.

Co-operative Bank which is 65 percent owned by co-operative societies, saw first quarter net profit decline by 3.6 percent to Ksh3.46 billion ($32.33 million) from Ksh3.56 billion ($33.27 million) in the same period last year.

This was due to increased provisions for non-performing loans which more than doubled to Ksh2.28 billion ($21.3 million) from Ksh900 million ($8.41 million) in the same period last year.

The bank which has operations in South Sudan earned Ksh1.26 billion ($11.77 million) from government securities and Ksh1.69 billion ($15.79 million) as interest on loans and advances during the period under review.

Non-interest income declined by nine percent to Ksh4.52 billion ($42.24 million) from Ksh4.98 billion ($46.54 million) on account of fee waiver to support customers impacted by Covid-19.

Operations in South Sudan returned a loss of Ksh89 million ($831,775.70) largely due to hyperinflation triggered by devaluation of the South Sudan Pound.

Last year, Co-op Bank acquired 90 percent shareholding in Kingdom Bank (formerly Jamii Bora Bank) for Ksh1 billion ($9.34 million). The subsidiary made a net profit of Ksh126.7 million ($1.18 million) in the three months to March 31 compared with a full year loss of Ksh76 million ($710,280.37) in 2020.

Diamond Trust Bank, with operations in Kenya, Tanzania, Uganda and Burundi saw net profit for the first quarter rise by 1.91 percent to Ksh1.94 billion ($18.13 million) from Ksh1.91 billion ($17.85 million) for same period last year. Non-interest income declined by 2.51 percent to Ksh1.55 billion ($14.48 million) from Ksh1.59 billion ($14.85 million).

The lender, however, increased loan loss provision by over 67 percent to Ksh684.25 million ($6.39 million) from Ksh408.09 million ($3.81 million).

NCBA Group which has operations in Kenya, Rwanda, Uganda and Tanzania increased its net profit by 73.61 percent to Ksh2.83 billion ($26.44 million) from Ksh1.63 billion ($15.23 million), with loan loss provision declining by 30 percent to Ksh2.63 billion ($24.57 million) from Ksh3.77 billion ($35.23 million).

Its interest income on government securities increased by 14.65 percent to Ksh4.38 billion ($40.93 million) from Ksh3.82 billion ($35.7 million) while non- funded income declined by 3.32 percent to Ksh5.24 billion ($48.97 million) from Ksh5.42 billion ($50.65 million).

“Internally, we focused on risk mitigation and management in a challenging environment, enhanced our NPL coverage through provisions and sought collaboration with development financial institutions on credit and risk sharing guarantees.”

“Revenues have remained flat with the costs declining marginally. Overall performance was largely impacted by lower non-interest income due to subdued digital lending on reduced disbursements and lower customer transactions,” said Mr Oigara.