Banks lose sh63b in bad loans

Central Bank of Kenya Governor Patrick Njoroge
NAIROBI, KENYA: Commercial banks in Kenya recorded Sh63 billion in non-performing loans in the last financial year owing to poor performance by manufacturers and traders during the 2017 general election, which slowed down loan repayments.

The value of bad loans was more than 80 per cent of the profit before tax made cumulatively by commercial banks, with the ratio of non-performing loans doubling from six per cent three years ago to 12 per cent.

Central Bank of Kenya (CBK) data indicates non-performing loans went up from Sh234.6 billion in June 2017 to Sh298.4 billion recorded as at June 2018 with the manufacturing, trade and real estate sectors leading in the losses. “During the period under review, eight out of the 11 economic sectors registered increased non-performing loans (NPLs),” explains the CBK in its latest annual report.

“The increase in NPLs was mainly caused by delayed payments by government agencies and private sector, business stagnation during the prolonged electioneering period and slow uptake of developed houses in the real estate sector,” said the CBK.

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The trade sector lead with the number of non-performing loans rising by Sh20 billion last year to Sh88 billion as at June 2018, with the CBK blaming the 2017 poll jitters for the depressed liquidity.

The same case was evident in the manufacturing sector where NPLs increased by 62 per cent, up from Sh33 billion in 2017 to Sh51 billion as at June 2018. “The real estate sector, where NPLs increased by Sh14.4 billion (48 per cent) as a result of slow uptake of developed housing units, and delay in subdivision of land,” indicated the CBK report.

This has since seen the ratio of gross loans to non-performing loans increase from 9.9 per cent in June 2017 to 11.97 per cent in June last year, with the industry recording sh298 billion cumulatively in NPLs.

Overall, the banking sector registered a 10 per cent growth in pretax profit from Sh69 billion as at June 2017 to Sh76 billion recorded in a similar period last year. Total revenue rose six per cent to hit Sh246 billion, while overall expenses stood at Sh158 billion.

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Central Bank of Kenyanon-performing loans