The banking sector’s aggregate balance sheet size increased by 4.2% to KSh 7.7 trillion in December 2023, from KSh 7.4 trillion in September 2023, according to findings of the latest Credit Officer Survey conducted by the Central Bank of Kenya (CBK).
- •This banking survey covered the last quarter between September and December 2023
- •It also found that loans disbursed by banks reached a total of KSh 4.2 trillion in December 2023.
- •Total deposits in the banking sector increased by 5.7 percent from KSh 5.5 trillion in September 2023, to KSh 5.8 trillion in December 2023.
Some of the big-ticket borrowers, according to the CBK survey, were witnessed in the Manufacturing, Trade, Financial Services, and Personal and Household sectors.
The increase in gross loans was mainly due to increased loans granted to individual borrowers.
The Banking industry’s asset quality, measured by gross nonperforming loans to gross loans ratio, improved from 15.0 percent in September 2023 to 14.8 percent in December 2023. This was due to a lower increase in non-performing loans of 0.7 percent.
The capital adequacy ratio decreased to 18.3 percent in December 2023, from 18.6 percent in September 2023.
Banking Sector Quarterly Pre-Tax Profits Drop as Expenses Rise
The Kenyan Banking Quarterly Pre-Tax Profit fell by KSh 9.1 billion from KSh 57.6 billion in September 2023, to KSh48.5 billion in December 2023.
The CBK Survey said this decrease in profitability was mainly attributable to a higher increase in quarterly expenses by KSh 32.3 billion compared to the increase in quarterly income by KSh23.2 billion.
Return on Equity (ROE) for the Banking sector decreased from 25.0 percent in September 2023, to 23.0 percent in December 2023. This was due to a higher increase in shareholders’ funds compared to an increase in profits.
Liquidity in the banking sector increased from 49.3 percent in September 2023, to 51.0 percent in December 2023. This was well above the minimum statutory ratio of 20 percent.
In the fourth quarter of 2023, the perceived demand for credit increased in Manufacturing, Trade, Real Estate, and Personal and Household. The Survey expects the level of non-performing loans or defaults to increase in the Personal and Household Sectors, and Trade during the next quarter. This is in tandem with the expected increase in demand for credit in these sectors.
The CBK undertakes a quarterly Credit Officer Survey to identify the potential drivers of credit risk.
The survey requires senior credit officers of banks to indicate their banks’ perception or actual position in the immediate past quarter and the subsequent quarter in terms of demand for credit, credit standards, asset quality, credit recovery efforts, deployment of liquidity, and impact of implementing new standards.
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