Moody’s, a US-based global integrated risk assessment firm, has assigned Kenya’s banking system a stable outlook, for the first time.
This assessment is based on expectations that a recovering economy will enable banks’ loan quality and profitability to rebound from weakened levels, while capital, funding and liquidity will remain strong.
Moody’s warns that while the problem of bad loans are the main credit challenge facing Kenyan banks, these but these will drop closer to pre-pandemic levels over the next 12 to 18 months.
Kenya’s Banking Industry Q3 results for most lenders show a significant recovery and improved profitability.
For instance, KCB Group Plc more than doubled its profit after tax for the nine months ending September 2021. Net profit stood at KSh 25.2 Billion from KSh 10.9 Billion a year ago, a 131% jump.
This improved, driven by higher income and reduced provisions as recovery from the COVID-19 pandemic accelerated in Q3.
Equity Group posted a 78.6% growth in net profi in Q3, 2021 on account of growth in non-funded income and reduced costs. The lender realised KSh26.8 billion net profit compared to KSh15 billion in Q3 2020.
Its Gross non-performing loans fell 9.7% to KSh56.18 billion from Q2 2021, representing 10.1 percent of the loan book at KSh559.01 billion.
Moody’s investors service also gave a stable outlook for banking sectors in Nigeria and Egypt while South Africa was assigned a negative outlook.
Moody’s said stable outlooks are supported by economic recoveries in the wake of the pandemic. Operating conditions vary across the continent and this is reflected in the different banking system outlooks.
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