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Kenyan banks defy coronavirus to post growth in first half

By People Reporter
Wednesday, September 9th, 2020
Central Bank of Kenya. Photo/PD/File
In summary

EARNINGS:  Listed commercial banks in Kenya defied the effects of Coronavirus (Covid-19) pandemic to post growth in deposit, loans and interest income in the first half of the year.

An analysis of the sector’s performance released by Kenya Bankers Association (KBA) shows that the banks between January and June recorded an 18.5 per cent growth in deposits, up from the 8.6 per cent growth in the same period in 2019.

The rise in deposit saw interest expenses grow faster by 10 per cent compared to 5.3 per cent in a similar period in 2019. 

Average loan growth came in at 16.1 per cent, faster than the 9.8 per cent recorded in the first half of 2019.

Interest income

Interest income rose by 10.4 per cent, compared to a growth of 3.7 per cent recorded in first half 2019. 

The faster growth in interest income was attributed to the 16.1 per cent growth in loans and increased allocation to government securities.

Covid-19 was first reported in Kenya in mid-March but the number of cases is declining. 

 “With the economy opened up, banks will record better performance in the second half as manufacturing, floriculture, mining and tourism sectors flourish,” said Ernest Manuyo, a lecturer at Pioneer Institute in Nairobi.  

President Uhuru Kenyatta announced phased reopening of the country early last month as the government moved to relax Covid-19 restrictions.

The president said cessation of movement into and out of the capital Nairobi, and Mombasa and Mandera counties would  allow people to travel into and out of these counties. 

Local flights resumed on July 15 followed by international air travel into and out the country on August 1.

A nother report prepared by KBA’s Centre for Research on Financial Markets and Policy, says the banking system remains sound and stable. 

The sector, the Kenya Bankers Economic Bulletin adds, is well capitalised and with sufficient buffers and thus enabling it to weather shocks associated with the pandemic without adverse implications on the system. 

It also has sufficient liquidity, albeit the modest deterioration in asset quality which is exerting downward pressure on profits and upward pressure on provisioning and thus likely to constrain private sector lending as the capital base is drawn. 

Since Covid -19 hit, Central Bank has put in place a raft of policy measures to help alleviate its adverse effects among them lowering of the policy rate, the C BR from 8.25 to 7.25 per cent and 7 per cent in March and April respectively. – Xinhua and PD Reporter

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