How The Corona Pandemic Has Affected Kenyan Commercial Banks
Kevin Namunwa  |  Sep 9, 2020

The Coronavirus pandemic has cost commercial banks Ksh19.48 billion. The virus outbreak caused an economic disruption which forced lenders to increase provisions for debt defaults.

According to the half-year results for 36 out of the 39 actively trading banks, the combined net profit dropped by 30.5% to Ksh 44.44 billion in comparison to the Ksh 63.92 billion profit recorded in the preceding similar period.

There was a slowdown in economic activities in Kenya as occasioned by the pandemic.

The slow performance saw increased debt defaults as Kenya imposed strict measures to control the spread of Covid-19.

 The value of bad loans in the banking sector rose by Ksh 29.95 billion between March and June alone showing the intensity of economic hardship facing borrowers due to increased layoffs and salary cuts.

Top seven Nairobi Securities Exchange (NSE) listed lenders have set aside Ksh 31.7 billion in half year to June, being 3.5 times the Ksh 9 billion that had been provisioned in the preceding similar period.

KCB Group, Equity Group and Absa Bank Kenya are among the lenders that raised their provisions for bad debt by the largest amounts at Sh7.9 billion, Sh7.1 billion and Sh3.7 billion respectively.

After Kenya recorded its first Coronavirus case, the government was forced to put up restrictions to curb the spread of the virus. The state imposed a curfew, closed schools, hotels, bars and restaurants and introduced social distancing rules.

Seven lenders— Bank of Africa, Mayfair, Spire, Consolidated, Housing Finance, Sidian and DIB Kenya— posted losses during the period that saw only nine banks grow profits.

Top lenders such as KCB, Equity, Cooperative Bank, Standard Chartered Bank Kenya and Absa Kenya all shed profits as they set aside increased amounts of money to reflect rising loan defaults in the economy.

Lenders such as Absa, SBM Kenya, Development Bank of Kenya and Ecobank posted declines of more than 50 percent in their bottom-lines.

A few medium and lower tier lenders like Bank of Baroda, Family Bank, Guardian, Guarantee Trust, ABC, Paramount Citi Bank Kenya and UBA defied the trend to post growths in their profits.