Kenya’s top eight banks cut their provisions against loan defaults by nearly half last year, helping drive the combined net profit by 80.29 percent to Sh132.41 billion.
Most banks cumulatively slashed provisions to Sh55.93 billion in the review period, from Sh106.94 billion in 2020 — reflecting a drop of 47.69 percent or Sh51 billion.
The drop in loan loss provisioning, costs associated with unpaid credit, helped most of the banks to post triple-digit profits and usher in a dividend boom.
The cut in loan loss provision reflects the gradual resumption in debt repayment amid recovery from Covid-19 economic hardships that triggered layoffs, job cuts and business closures.
“While the industry provisions might have come down, we still do have some pressure on hospitality where we are well represented as well as construction. We have seen those sectors are taking a while to recover,” KCB chief finance officer Lawrence Kimathi said on March 16.
“We have taken a prudent approach that ‘let us downgrade those (sectors), take time to rectify them and do recoveries’.”