Kenya’s Banking Industry Balance Sheet size expanded by 12.4% in 2020 to KSh 5.4 Trillion from KSh4.8 Trillion in 2019, driven by a faster expansion in non-loan assets. This is according to the Kenya Bankers Association’s (KBA) State of the Banking Industry (SBI) Report 2021.
With loans to customers recording a slower growth due to the effects of COVID-19 on employment and household incomes, Banks increased their investments in the safer Government paper-which grew by 18.5%.
Banking industry loans and deposits
The report says that the lending Industry’s Net loans and advances increased by 9.1 % in 2020 to close at KSh 2.93 Trillion from KSh 2.63 Trillion in 2019.
The lending Industry’s total deposits rose 13.1% to KSh 4.11 Trillion at the end of 2020.
This growth in deposits during the year outpaced gross loans growth, enhancing liquidity in the banking system.
Dr Samuel Tiriongo, KBA Research and Policy Director said the banking industry’s tax contribution was pegged at KSh 42.4 Billion in 2020, a declined from KSh 55.4 Billion in 2019, reflecting disruptive effects of the COVID-19 pandemic on business and incomes.
The lending sector recorded lower performance mainly due to provisions made to cater for a massive portfolio of non-performing loans and other operating costs.
In 2020, total provisioning for loan losses by the banking sector increased by 47.5% to KSh 198.1 Billion from KSh 134.3 billion in 2019,
Trade, manufacturing and agriculture portfolios were the most affected.
Loan loss accommodations absorbed 45.7% of non-performing loans compared to 40.2% in 2019.
The lending sector’s total capital adequacy ratio rose to 19.0% in 2020 from 18.8% the previous year and above the minimum statutory requirement of 14.5%, due to a rise in total capital, which outpaced the growth in total risk-weighted assets.
The banking sector’s capital adequacy ratio rose to 19.0% in 2020 from 18.8% in 2019 due to a heightened risk environment.
According to Dr Habil Olaka, KBA Chief Executive, the growing market risks, stiff competition and a more demanding customer, and a rapidly changing regulatory environment have forced banks to invest more in supporting the economy and the lending business.
This KBA-SBI Report is an annual publication of the Kenya Bankers Association Centre for Research on Financial Markets and Policy, promoting the understanding of Kenya’s banking business.
The report draws its data from the financial statements of all banks between 2003 and 2021.