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Equity and KCB both lifted provisions in the first six months of 2020 to brace with the harsh economic environment that has severely affected lending.
Equity Group increased its loan provisions by eightfold from Ksh 0.9 billion in 2019 H1 to Ksh 8 billion in 2020 H1. Similarly, KCB Group more than doubled their allocation for bad loans, setting aside Ksh 36 billion to cater for portfolio risk emanating from COVID-19 related disruption in the economy. Nevertheless, Corporative bank maintained conservative approaches towards provisions, allocating Ksh 1.8 billion for 2020 H1 compared to Ksh 1.1 billion in 2019 H1.
The higher provisions tamed half-year profits for the banks.
Equity’s profit fell by 24% to Ksh 9.1 billion, whereas KCB Groups’ profit fell by 40% YoY. Co-operative bank’s recorded the least decline in net earnings for the half-year, which fell by 7.7% to Ksh 9.6 billion, corresponding with its minimal increase in provisions.
Measures to soften the economic blow of the pandemic on the consumer such as tariff-based waivers for transaction fees chipped away non-interest income, which depressed profits further.
Analysts at Tellimer Inc believe that Kenya’s top banks are unlikely to pay dividends for the year unless there is a turn around performance in the second half of the year. Meanwhile, the Central bank urges lenders to table discussions on their capital adequacy with the regular before making dividend decisions for the year.
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