Kenyan Banks sound Profit Warnings on Covid-19 loan defaults

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Kenya’s commercial banking sector are projecting a substantial fall in their full-year net profits for 2020 on account of Covid-induced economic disruptions that have weakened borrowers’ ability to repay loans.

The kenyan lenders say that they have had to significantly raise loan loss provisioning to reflect the economic fallout facing individuals and firms, according to Narobi’s Business Daily

The report says Co-operative Bank of Kenya has become the latest to inform its investors that it expects a material fall in full year earnings despite revenue from the mainstay business of lending registering a growth.

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“Loan loss provisions have been much higher than in the previous year in appreciation of the challenges that businesses and households continue to grapple with in meeting their obligations to the bank,” said the lender.

Banking sector’s ratio of non-performing loans has risen from March’s 12.5 percent to 13.6 percent in October— the highest since August 2007 when it stood at 14.41 percent.

Profit fall will mark a rare cycle for Kenya’s banking sector which has been enjoying growth in earnings despite previous disruptions such as interest rate cap in 2016.

Business Daily

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