Higher Kenyan bank bad loans should not cause panic - Barclays

Barclays Kenya Chief Executive Jeremy Awori. (Photo: File/Standard)

An increase in bad Kenyan bank loans should not cause panic as it comes after several years of fast lending growth, the chief executive of Barclays Kenya said on Wednesday.

The rise in bad debts over the past year has fuelled concerns about the stability of the country's 43 lender after the central bank had to take control of a third in nine months last week.

Central bank data showed gross non-performing loans with the east African nation's banks rose to 6.8 percent of the total in the year to February from 5.7 percent last year.

Barclays Kenya Chief Executive Jeremy Awori said annual lending growth in the sector had been running at above 20 percent in recent years, meaning the quality of some loans could have dropped.

"It is cyclical ... We shouldn't have a sense of paranoia and panic about non-performing loans increasing ," the chief of Kenya's fifth-largest lender told reporters.

"Non-performing loans will rise but if a bank is well run it will take care and make sure it is still viable in terms of operations," Awori said.

Last week, central bank governor Patrick Njoroge, who has put in place more stringent reporting requirements for banks since being appointed in June, said there were no "systemic problems" in the sector.

The governor also promised the regulator would offer liquidity to any lender that finds itself falling short through no fault of its own, helping to restore calm among worried depositors and investors.

"The efforts made by the central bank and the Treasury to provide more stability after the announcements that came through I think are very welcome," said Awori.

Barclays Kenya, part of the Barclays Africa group, has itself been fairly conservative in recent years, growing at a slower pace than its peers.

Loans grew 16 percent last year, below an industry average of 18 percent, and Awori said the conservative policy was in recognition that rapid growth can sometimes have undesired results such as higher bad debts.

The bank's ratio of gross non-performing loans to total loans stood at 3.6 percent in December, well below the industry trend.

"You cannot defy gravity forever. If you think you can, at some point it will come to roost and that is now happening," Awori said.