The level of Non-Performing Loans (NPLs) in the Banking industry is expected to rise in the second quarter of 2021. This alert has been issued in the latest Credit Officer Survey report by the CBK for the Q1 ended March 31st, 2021.
The Survey found 53% of the respondents expecting the level of non-performing loans to rise in the period to June this year due to the continued COVID-19 pandemic and the associated containment measures.
The respondents indicated that virtually all economic sectors would be affected negatively by the pandemic.
According to figures from the Credit Officer Survey, for Q1, 2021, Kenya’s banking industry balance sheet size increased by 2.0% to KSh 5.5 Trillion in March 2021 from KSh 5.4 Trillion in December 2020.
Loans to customers in Q1, 2021
Total credit to bank customers increased by 1.4% from KSh 2,999.47 billion in December 2020 to KSh 3,040.45 billion in Q1, 2021. A surge in loan uptake was witnessed in the Financial Services and Energy and Water sectors.
Total deposits held banks increased by 2.8% from KSh 4,021.94 billion in December 2020 to KSh 4,133.15 billion in March 2021.
The industry’s asset quality, measured by gross non-performing loans to gross loans ratio, deteriorated from 14.1% in December 2020 to 14.6% in March 2021.
This was due to crippling effects of the pandemic on businesses.
Quarterly pre-tax profit increased by KSh22.3 billion from KSh23.6 billion in December 2020 to KSh 45.9 billion in March 2021 as banks engaged in cost-cutting measures.
Return on Assets increased to 2.7% in March 2021 from 1.6% in December 2020while Return on Equity increased from 13.8% in December 2020 to 22.0% in March 2021.
During the quarter ended March 2021, liquidity in the banking sector increased from 54.6% in December 2020 to 56.3% in March 2021.
For the Q2, 2021, lenders are expected to intensify efforts to recover loans from customers, led by those who took out Personal and Household loans (87%), Transport and Communication (84%), Trade (82%), Building and Construction (82%) and Real Estate (79%).
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