Kenya’s Quarterly profit before tax decreased by KSh 1.45 billion from KSh50.53 billion in June 2021 to KSh49.08 billion in September 2021. This was as a result of a higher increase in expenses (4.7 per cent) as compared to an increase in income (2.2 per cent). Return on Assets decreased to 2.65 per cent in September 2021 from 2.71 per cent in June 2021.
This is according to the latest figures from the Central Bank of Kenya (CBK) contained in the third quarter Commercial Bank Credit Officer Survey that covered between June and September 2021 and involved 39 banks.
Kenya’s Banking Industry’s aggregate balance sheet increased by 2.5 per cent to KSh5,822.09 billion in September 2021, from Ksh.5,679.99 billion in June 2021.
Gross loans increased by 2.7 per cent from KSh 3,110.07 billion in June 2021, to KSh 3,193.26 billion in September 2021. The growth in gross loans was mainly due to increased advances in the Trade and Real Estate sectors.
Total deposits increased by 2.3 per cent from KSh 4,249.41 billion in June 2021, to KSh4,345.72 billion in September 2021.
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 bank’s 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.
Kenya’s banking sector asset quality, measured by gross nonperforming loans to gross loans ratio improved from 14.0 per cent in June 2021, to 13.6 per cent in September 2021. This was attributed to a 2.7 per cent increase in gross loans which was higher than a 0.09 per cent increase in non-performing loans.
Return on Equity decreased from 22.67 per cent in June 2021, to 21.97 per cent in September This is a result of a decrease in quarterly profits before tax (2.87 per cent) and an increase in total shareholders’ funds (3.80 per cent).
Liquidity in the banking sector decreased slightly from 56.8 per cent in June 2021, to 56.7 per cent in September 2021. This was well above the minimum statutory ratio of 20 per cent
41 per cent of Kenya’s banks indicated that NPLs are likely to fall in the fourth quarter of 2021. This is attributed to enhanced recovery efforts being implemented by most banks. 26 per cent of the respondents expect the level of NPLs to rise in the fourth quarter of 2021 as a result of the continued COVID-19 pandemic. 33 per cent of respondents expect NPLs to remain constant.
Banks indicated that the level of NPLs is expected to remain constant in ten economic sectors and fall or remain unchanged in the Trade Sector.
For the quarter ended December 31, 2021, Kenya’s banks expect to intensify their credit recovery efforts in all economic sectors. The intensified recovery efforts are aimed at improving the overall quality of the asset portfolio.
For the quarter ended December 31, 2021, banks expect to intensify their credit recovery efforts in all economic sectors. The intensified recovery efforts are aimed at improving the overall quality of the asset portfolio.
The main sectors that Kenya’s banks intend to intensify credit recovery efforts, in order to enhance reduction of NPLs, therefore, improving the overall quality of their asset portfolio, are Trade (87 per cent); Personal and Household (86 per cent); Building and Construction (81 per cent); Real Estate (79 per cent) and Manufacturing (78 per cent).
With improved liquidity, it is expected that in the fourth quarter of 2021, credit to the private sector will increase as Kenya’s banks intend to deploy the additional liquidity by investing in Treasury Bonds (23 per cent), lending to the private sector (21 per cent), investing in Treasury Bills (19 per cent), interbank lending (19 per cent), taking advantage of CBK liquidity management through repos (12 per cent), investing in other instruments including offshore (3 per cent) and increasing their cash holding (3 per cent).