East African Banks have eased-off on loan payments as the coronavirus pandemic has seen the world face its biggest health crisis this century, posing one of the most unsettling periods to businesses, and people losing livelihoods.
Top East African banks increased provisions for bad debts by over $736 million in 2020 to reduce exposure on household and business loans in the countries ravaged by the Covid-19 pandemic, affecting profitability and returns to shareholders.
A review of the East African banks audited financial statements show that the top eight Kenyan banks by market share more than tripled their loan loss provisions to Ksh104.64 billion ($960 million) from Ksh28.68 billion ($263.11 million) in 2019.
Equity Bank, the largest lender in the East African region by assets of $9.35 billion and market capitalization of $1.44 billion, took the greatest hit on its net earnings after increasing its loan loss provision by Ksh21.6 billion ($198.16 million) to take care of the Ksh171 billion ($1.56 billion) worth of loans that had been restructured to bailout customers adversely affected by the pandemic.
Equity Bank was followed by KCB and NCBA banks which increased their loan loss provisions by Ksh18.62 billion ($170.82 million) and Ksh14.19 billion ($136.69 million) respectively.
Other Kenyan banks that followed suit include Diamond Trust Bank (DTB) which grew its provisions by Ksh6 billion ($55.09 million), Co-operative Bank ($51.19 million), Absa Bank Kenya ($44.22 million), Standard Chartered Bank Kenya ($30.36 million) and I&M Bank ($16.88 million).
According to the Chief Executive Officer of KCB Group Joshua Oigara, the Covid-19 pandemic has seen the world confront its biggest health crisis in this century, posing one of the most disruptive periods to businesses. As a Bank, we recognize that our actions during this pandemic are essential in keeping our economies across the region going.”
In Rwanda, the Bank of Kigali increased its provisions for bad loans by 83 per cent ($16.6 million) to $40.2 million from $23.6 million.
According to the National Bank of Rwanda, Rwandan banks restructured loans worth Rwf799.9 billion ($218 million), accounting for 31.7 per cent of total loans last year (2020).
Similarly, in Tanzania, National Microfinance Bank (NMB) increased its loan loss provisions by $7 million while CRDB reduced its provisions by $8 million.
In Uganda, Stanbic Bank Uganda’s bad loan provisioning more than doubled to Ush91.8 billion ($25 million) in 2020 from Ush43.5 billion ($11.8 million) in 2019, leading to a sharp dip in profits to Ush242 billion ($66 million) from Ush259 billion in 2019 ($70.6 million).
Comparatively, West African banks under-provisioned their loans by $157 million while Southern, and Central African banks under-provisioned by $28milion, according to market analysts at the African Financials Group.
In comparison, the report dated March 29, 2021 shows that in West Africa, Nigerian banks lent a total of $22.57 billion with bad debt charge increasing 73 per cent to $433 million from $ 251 million in 2019 while Ghanaian banks lent an estimated $614 million with loan loss provisioning increasing 182 per cent to $37 million from $13 million in the same period.
Other countries’ banks like those in South and Central Africa reduced their loan charge-off levels in both dollars and percentage terms.
For instance, banks in Botswana reduced their loan loss provisioning by 85 per cent to $2 million from $16 million on a total loan book of $941 million while those in Malawi reduced bad loans charge by 17 per cent to $2 million from $3 million on a total loan book of $215 million.
In Zambia, the banking industry reduced loan loss provisions by 29 per cent to $1 million from $2 million on a total loan book of $354 million.