Data from Central Bank of Kenya(CBK) shows that commercial banks have now restructured loans totalling KSh 1.38 Trillion, which is 46.5% of the industry’s total loan book of KSh 2.9 Trillion. This is as the industry strives to shield its customers and balance sheet from ravages of the COVID-19 pandemic.
This disclosure was made by the Central Bank of Kenya(CBK) Governor Dr Patrick Njoroge during the Monetary Policy Committee (MPC) briefing, the last such meeting this year.
“While liquidity of the banking sector remains resilient, credit risk has been elevated with the ratio of non-performing loans rising to 13.6% during the August-October 2020 period. Banks have restructured their loans books due to liquidity pressures on the borrower. This has affected lenders’ profitability which is something we had expected,” said Njoroge.
Return on Assets for banks has thus fallen from 2.7% in September 2019 to 1.8% in September 2020 while Return on Equity (ROE) has declined from 22.5% to 15.8% during the same period.
Njoroge said Banks have not waited for the COVID-19 cloud to lift as shown by the numerous mergers and acquisitions that have been witnessed during the year.
The list of lenders that have engaged the mergers and acquisition gear include Co-operative Bank of Kenya which acquired Jamii Bora Bank, Transnational Bank which was bought by Nigeria’s Access Bank. Egyptian Commercial International Bank (CIB) purchased a majority stake in Mayfair Bank in April.
Equity Group and KCB have also made inroads into the Rwanda and Democratic Republic of Congo(DRC).
Njoroge added that with rapid-fire digitization taking place in the banking industry, an estimated 2.7 Million accounts that were previously dormant, have been brought back on-stream, pushing up active wallets by 10%.
He disclosed that in light of shortfalls by the Kenya Revenue Authority, Treasury was in the process of ‘revising the 2020/21 budgetary estimates and policy, to cater for the emerging revenue and expenditure pressures.
He declined to divulge details on the IMF budgetary support discussions with Kenya, pointing out that while public debt levels were still sustainable, there was need to move away from the current dangerous margins and get back to the middle of the table.
The Central Bank of Kenya (CBK) has also projected Kenya’s economic growth rate at 1.3% in 2020, striking a more optimistic note from the grim prospects painted by the International Monetary Fund(IMF) and the World Bank.
“We expect Kenya’s Gross Domestic Product to hit 1.3%, ignoring the huge slump of 21.1% that has been recorded in the education sector following the shutdown of learning Institutions that has kept children from schools since March this year, “said Njoroge, the CBK Governor.
Both National Treasury and the Kenya National Bureau of Statistics(KNBS) have projected a GDP growth of 0.6%, figures that the CBK maintains must be revised, based on new data from the Q1 and Q2 periods.
CBK’s cautious projections are based on strong growth drivers that have been witnessed in the second and third quarter of the year that has been seen in agriculture and the manufacturing sectors.
According to CBK estimates, the agriculture sector grew at the rate of 5.8% in Q1, 6.2% in Q2 and 6.8% in Q3, with the last quarter of 2020 expected to decline to 5.6%, which brings the average growth rate for the sector at 6.2%.
While Maize production was initially forecast at 36.9 Million bags, this figure has since been revised by CBK and the Ministry of Agriculture to 42.9 Million bags in September 2020 and 44.9 Million bags in November, a growth of 12.7%.
In November 2020, Kenya’s harvest is expected to reach 7.7 Million bags of Beans, 2.4 Million bags of Potatoes, 3.1 Million bags of Sorghum, 1.1 Million bags of Millet, 4.2 Million bags of Wheat and 1.6 Million bags of Rice.
Updated on 7th Feb 2021.