Most Kenyan Banks reported high net earnings and declared dividend payouts to shareholders for the Financial Year ending December 2021 despite the adverse effects of the prevailing COVID-19 on the economy.
Absa Bank announced the highest rise in net profit by 161 per cent followed by Equity Group at 99 per cent, KCB Group at 74 per cent, Standard Chartered Bank at 70 per cent, Cooperative Bank of Kenya by 53 per cent and Stanbic Bank Kenya by 39 per cent.
In order to cushion themselves from the effects of the pandemic, most banks set aside huge reserves for loan provisions – bad debts in Financial Year 2020. As the economy recovered in 2021 banks reduced their loan provisions and in the process recorded a rise in profits.
Loans Provisions for KCB Group for the financial year ending 31st December 2021 reduced by 52% to close at KShs.13.0 billion from KShs.27.2 billion a similar period last year. The decrease was largely due to lower corporate and digital lending impairment charges after the deliberate action on covid related provisions that were absorbed in the previous year.
Consequently, most banks increased the total income in the account of an increase in interest income driven by an increase in earning assets, non-funded income, and lower cost of funding drove the profits high post covid 19 recovery. Banks invested in low-risk investments like government securities that earned them up to 13.5 per cent returns.
The lenders cited they preferred lending to the government to finance the deficit budget of Ksh 1.024 trillion for the financial year 2021/2022 rather than businesses and customers since it is less risky and returns are guaranteed.
“We made significant progress in achieving our 2021 strategic targets which delivered a strong financial performance that was in line with gradual economic recovery across all markets. The third and fourth quarters were the turning point with a pick-up in lending activity even as the COVID-19 pandemic continued to impact on economic activity” KCB Group CEO & MD Joshua Oigara
Additionally, local and regional expansion of banks saw the customer deposits and interest income grow driving high profits. The two leading banks Equity Group Holdings and KCB Group Holdings made huge revenues from their expansion and acquisitions of banks in Rwanda and DRC Congo in 2021.
Equity Group Holdings has diversified business operations in six countries across Africa with the dominant market in Kenya contributing only 59% and 63% of the Assets and Revenues respectively.
Equity Group acquired Banque Commerciale Du Congo in 2020 and ProCredit Banks in DRC Congo and renamed them Equity Group Congo. The operations in DRC contributed Ksh 4 billion in net profit to the group which is 10 per cent of the total net income of Ksh 40 billion. The regional subsidiary in Uganda – Equity Group Uganda contributed Ksh2.6 billion.
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