Kenyan banks squeezed by rising non-performing loan book

The value of non-performing loans and assets held by commercial banks in Kenya increased to 1.2 billion U.S. dollars in the first nine months, the Central Bank (CBK) said in its latest banking sector report released Wednesday.


Although the value of the non-performing loans increased by 0.7 percent, the quality of assets held by the banks decreased from 2.7 percent in June to 2.5 percent in September, the CBK said.

First Capital Plus' new status brings the total number of commercial banks in the country to 27.


The 42 commercial banks registered in Kenya have seen their capital base grow by 2.1 percent in the past nine months to 5.6 billion dollars in September from 5.4 billion dollars in June.

The report released on Wednesday shows at least eight out of the 11 sectors of the Kenyan economy will record an increment in the value of the non-performing loans.

“The banks continue to deploy enhanced credit appraisal standards to mitigate credit risk,” the CBK said in the report on performance of the Kenyan banking sector.

The banking sector advanced loans worth 22.8 billion dollars in September down from 21.23 billion dollars, resulting into a 6.9 percent growth in the loans portfolio in the various economic sectors.

The report shows most lenders advanced loans to borrowers’ spending on personal and household purchases. This partly explains the vibrancy recorded in Kenya’s wholesale and retail sectors.

The mining sector appears to have received the smallest share of the loans advanced by the banks. The shilling value of the household expenditure hit 5.67 billion dollars while the financial services borrowed 0.8 million dollars.

According to the CBK, the financial sector has recorded the highest amount of non-performing loans. This suggests the economy in the East African nation is struggling.

The energy and water sectors have also been hit by the non-performing loans, which mean payment of electricity and water services are affected by low income from regular users.

“The sector with the highest decrease in the non-performing loans in the same period was tourism, restaurant and the hotel sector, which recorded a decrease of 14 percent,” the CBK report stated.

Kenya’s tourism sector has suffered the most in the recent months following the slapping of travel sanctions on the tourism-rich coastal province. The region suffered from the perceived insecurity.

However, foreign governments, including the British and the American governments, have recently lifted the negative travel advisories, allowing tourists to flock back to the region.

Most hotels have therefore recorded marginal growth and the central bank confidence survey in October showed bookings slightly above 54 percent, showing a magical recovery.

The Banking sector has shown no signs of recovery with pre-tax profits in the third quarter down to 3.73 billion dollars in September.

The profits dropped by 5.8 percent from 3.96 billion dollars. The banking sector mostly obtained its profits on interests on government securities and interest income. Enditem

Source: Xinhua

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