The country’s largest bank in terms of assets, KCB Group registered a net profit of Ksh. 7.5 billion in the first six months of the year which was Ksh. 5.2 billion less than what it posted in a similar period in 2019.
KCB has attributed the 40.2 percent performance dip to increased provisioning for bad debt which has seen the lender’s provision for bad loans almost quadruple from Ksh. 3 billion to Ksh. 12.6 billion in the period under review. The jump in provisioning downplayed stout earnings from the Group’s lending business, which saw net interest income increase by 22 percent to Ksh.31 billion.
Ever since the first case of the coronavirus was confirmed in the country on March 12, Kenya’s regime implemented measures such as limiting business hours, banning on international travel, and locking down counties like Nairobi and Mombasa, in attempt to tame the spread of the pandemic.
The measures have gradually been lifted but it is evident from the number of job losses and pay cuts experienced in the labour market that the virus has hurt company earnings and crippled Kenya’s economy.
Experts reckon that the economic damage brought forth by the pandemic will continue through the latter half of the year, with lenders having started to feel the heat in the second quarter of the year.
“The second quarter was the toughest in our recent history as the pandemic hurt economic activity across markets. Most of the key sectors were nearly shut down and our customers continue to face unprecedented challenges,” KCB’s chief executive, Joshua Oigara, said in a statement.
Should decreased performances be the norm in the banking sector in the last six months of the year, investors will be facing record profit warnings and more dividend cuts. Nairobi Securities Exchange (NSE) listed firms are mandated by law to notify investors if they anticipate a net profit decline of at least 25 percent.
Equity Group and NCBA are some of the local lenders who have decided against announcing dividends for the financial year ended December 2019. It is anticipated that lenders will be even warier about cash payouts in the current financial year.