Biggest Kenyan Bank Outpaces Rivals With $1 Billion Loan Reviews

Eric Ombok

22 May 2020, 02:36 PM IST

(Bloomberg) --

Kenya’s largest bank restructured more than 110 billion shillings ($1.03 billion) of loans by mid-May, the most by any of the country’s lenders, as measures to curb the coronavirus pandemic take their toll on businesses.

“Most of it is our large customers, institutional clients, that’s around 90 billion shillings,” KCB Group Ltd. Chief Executive Officer Joshua Oigara said in an interview. “We have another 20 billion shillings for our mortgage customers and real estate, and the balance is for retail loans, which we haven’t seen much impact yet.”

East Africa’s largest economy faces a severe hit from the virus fallout, with the government already struggling before the outbreak to boost revenue and fund development projects. The Treasury, which sees economic growth slowing to 2.5% this year, compared with earlier estimates of around 6.2%, this week unveiled a 53.7 billion-shillings stimulus package to support businesses.

Kenyan banks restructured 273.1 billion shillings of loans in April, equivalent to 9.6% of the industry’s total book of 2.8 trillion shillings, according to the central bank.

KCB set aside 2.9 billion shillings for doubtful debts in the three months through March, compared with 1.16 billion shillings a year earlier. This came as the lender’s non-performing loans soared 71% to 66.2 billion shillings after it bought National Bank of Kenya Ltd., which accounted for about a third of the souring credit.

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Following the Central Bank of Kenya’s decision two months ago to cut its cash reserve requirement by a percentage point to 4.25%, KCB’s liquidity increased by almost 5 billion shillings, all of which has been disbursed to borrowers, Oigara said. The industry’s liquidity increased by 35 billion shillings following the reduction, he said.

“We will see less loan growth, lower than what we anticipated before, which was 15%,” Oigara said of 2020 target. “We achieved 11% for the first quarter and by June we should have a good view on what the numbers should be.”