Lenders mull surge in bad loans stock
Commercial banks expect the level of bad loans to remain raised in the first quarter of 2022 even as they increase recovery pressure on borrowers.
A new credit survey by the central bank shows that 41 per cent of banks expect the level of bad loans to remain at last year’s level while 15 per cent expect bad loans to increase.
Only 44 per cent of the banking sector expect the size of bad loans to drop in the first three months of 2022.
“About 41 per cent of respondents expect non-performing loans (NPLs) to remain constant. 15 per cent of the respondents expect the level of NPLs to rise in the first quarter of 2022, as a result of the continued Covid-19 pandemic,” says the regulator in its Credit Survey Report for the last quarter.
The credit officers in various commercial banks said the level of bad loans is expected to remain constant in nine economic sectors during the next quarter. In the trade sector, respondents indicated that the level of bad loans is expected to fall.
Recovery to intensify
For the quarter ending March 31, this year, banks expect to intensify their credit recovery efforts in nine economic sectors and two sectors, mining and quarrying, and energy and water, the recovery efforts will not change.
The intensified recovery efforts are aimed at improving the overall quality of the asset portfolio.
“Credit risk is the single largest factor affecting the soundness of financial institutions and the financial system as a whole,” CBK said.
The asset quality, measured by gross nonperforming loans to gross loans ratio improved from 13.6 per cent in September 2021, to 13.1 per cent in December 2021.
This was attributed to a 2 per cent decrease in non-performing loans and a 1.7 per cent increase in gross loans.
