Kenyan banks posted a tiny 2.94% growth in profit before tax to Ksh38.4 billion in the first quarter of the year, slowed by rising bad debts, with non-performing loans growing by about 16%.
The industry, which recorded Ksh37.3 billion during the same period a year ago was, however, 51.5% better than the Ksh5 billion in fourth quarter 2015, Central Bank figures show.
Gross non-performing loans in three months to March rose 15.8% to Sh170.6 billion from Ksh147.3 billion in December. This is the equivalent of 7.86% of the Sh2.22 trillion in gross loans advanced by the 43-bank industry – a rise from 6.80 per cent of Ksh2.17 trillion gross loans last December.
Bad debt grew highest in real estate sector at 42.3%% quarter-on-quarter to Sh19.78 billion due to a slowdown in demand for finished units, the CBK said.
The default rate in personal loans increased by 21.5 per cent to Ksh50.62 billion “as a result of negative macroeconomic drivers such as job losses and delayed salaries”.
Banks, however, cut loans to households – the highest sector by loan volumes – by Ksh20.4 billion to Ksh553.1 billion in March from Sh573.5 billion in December.
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The (quarter-on-quarter) growth in profitability is mainly attributable to a higher decrease in total expenses by 8.5 per cent as compared to a decrease in total income of 2.7 per cent in the quarter ended March 2016, the CBK says in quarterly economic review.
“As a result of increased profitability, the return on assets increased from 2.9 per cent in December 2015 to 3.4 per cent in March while return on shareholders’ funds also increased from 23.8 per cent in December 2015 to 27.7 per cent in March.”
The manufacturing sector posted a 15.5 per cent rise to Ksh19.85 billion in what the CBK attributed to cash flow challenges by companies due to a slowdown in business conditions.
NPLs in the recovering tourism and hospitality sector, a sector which has in the recent years been battered by t*******t threats grew by a slower 5.04 per cent to Ksh2.69 billion.
Transport and communication sector, however, posted the highest drop in bad debt at 31.1 per cent to Ksh17.98 billion. “This was occasioned by enhancement of road safety rules, which has ensured continued business by transporters hence continued repayment of loans,” the CBK said. “The transport infrastructure has also been improved to the benefit of transporters.”
The NPLs in agriculture and, mining and quarrying sectors also decreased by 10.78 and 6.22 per cent, respectively, to Ksh7.53 billion and Ksh2.17 billion.
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