How COVID-19 affected the performance of Kenyan banks in third quarter

Kenya's blue-chip companies are feeling the effects of the COVID-19 fallout, with a recent drop in their third-quarter performances. Economic Analyst Odhiambo Ramogi shed light on the latest market updates from the Nairobi Securities Exchange in an exclusive interview with CNBC Africa. The market has shown some improvements and minor adjustments, but the overall sentiment remains cautious as banks report negative figures. KCB, a prominent player in the Kenyan banking sector, shocked the market with a profit warning stating that their profits may decline by up to 25% compared to the previous year. This trend is expected to reverberate across other major banks, causing anxiety within the financial sector. However, Cooperative Bank seems to have weathered the storm better than its counterparts, thanks to strategic acquisitions that have bolstered its position in the industry. Ramogi remarked on the challenges faced by the banking sector, citing reduced borrowing activity due to the economic slowdown caused by the pandemic. He highlighted that banks earn a significant portion of their income from interest on loans, which has been impacted by the current climate of low economic activity. Despite these challenges, Ramogi believes that the underlying fundamentals of banks like KCB remain strong, making them attractive investment options once the crisis subsides. The discussion also touched on the impact of legislative changes on banking performance, with Ramogi emphasizing that solid regulation and conservative management practices have historically shielded the sector from political fluctuations. While external factors like currency devaluation have added to the complexities faced by Kenyan businesses, Ramogi pointed out that the situation is temporary and can be managed with prudent fiscal policies. He expressed optimism that the economy will recover once productivity resumes and businesses regain their momentum. The interview concluded with a reflection on the evolving energy landscape in Kenya, where consumers are increasingly turning to solar power as an alternative to traditional utilities like Kenyan Power. The shift towards solar energy poses a challenge to established players like Kenyan Power, pushing them to reevaluate their pricing and service offerings to retain their customer base. The dynamic market conditions and changing consumer preferences underscore the need for adaptability and innovation across various sectors in Kenya's economy.