“Generally the banking sector on a quarter-on-quarter basis performance has come down. If you’re looking at the listed banks, which at the end of the third quarter represent about 76 per cent of the banking sector, at the funded income segment of the interest income, it was down one per cent,” Ecobank Research, head of financials desk George Bodo told CNBC Africa.
“Non-interest income was down one per cent, it’s only cost that went up. If you drop down the bottom line, net earnings for the ten banks was down an excess of 10 per cent. On a quarter on quarter basis, there was a bit of stress in the banking sector.”
Kenya’s banking industry has experienced growth in all its sectors, with the size of assets standing at 2.4 trillion shillings, loans and advances amounting to 1.4 trillion shillings for the period under review.
Bodo however explained that the results in the period showed no exceptional performance in terms of booking assets. There has been an additional slowdown in private sector uptake, which is still below the 10 per cent central bank target range.
“This performance boils down to the fact that most of the assets were non-performing, especially in the third quarter. If you look at a year to date basis, earning assets were up six per cent but non-performing assets and non-performing loans were up 39 per cent,” Bodo explained.
Large banks such as Kenya Commercial Bank, which continue to dominate the non-performing loans in the sector, account for about 50 per cent of the listed banks’ total portfolio. Bodo adds that these banks are the key drivers of this particular performance.
“There’s a general loophole in terms of regulation in this country to the extent that you can restructure a non-performing loan as much as you want. What’s happening is that some of these non-performing loans are not brand new,” said Bodo.
“The best thing is the regulator needs to crack the whip here and I think it’s doing that silently. These things need to be classified, they need to classified, suspend the interest, liquidate the collateral and clean up the books.”