Shaken by the effects of the Coronavirus, the profits before taxes (BAI) of Kenyan banks fell drastically over the 11 months of 2020. According to Central Bank (CBK) data released on February 1, 2021, BAI fell 28.2 percent to 107.7 billion shillings ($ 979.15 million) from 150.1 billion shillings ($ 1.3 billion) a year earlier. This represents their lowest level in 8 years in the banking sector which has seen a history of strong profit growth.
Based on a few indicators, the net profit in the banking sector for the year 2020 was likely to decline. From this perspective, several banks including Standard Chartered Bank Kenya, Absa Kenya, Cooperative Bank of Kenya, DTB, I&M Holdings and NCBA, have been skeptical. They have said their net profits will decline by 25% for the year 2020. This is due to an increase in loan defaults and customer demands.
According to the statistics, bank borrowers defaulted by 73.05 billion shillings ($ 664.1 million). Defaults pushed the non-performing loan (NPL) ratio to 14.1% – the highest since August 2007 – from 14.41%. This resulted in an extension of loan repayments worth 1.63 trillion shillings at the end of December 2020, equivalent to 54.2% of total loans.
