Commercial banks recorded an 11.58 per cent increase in pre-tax profits to Sh181.1 billion in the first eight months of the year, defying an environment of rising loan defaults and low willingness to borrow.
Central Bank of Kenya (CBK) data shows that January-August profits rose from Sh162.3 billion in the same period last year.
Data shared by Central Bank of Kuwait Governor Kamau Thog during a post-monetary policy press conference showed that March was the best month for banks, with pre-tax profits standing at Sh27.3 billion. August was a slower month with profits at Sh17.6 billion, making it the only month since January with profits below Sh20 billion.
The performance shows that banks are on track to maintain a growth path in profitability, defying a difficult year that saw floods between March and June, anti-government demonstrations in July, and a general liquidity shortage, which hurt other sectors of the economy.
Data from the Kenya National Bureau of Statistics showed that the finance and insurance sector grew by seven percent in the first quarter of the year before slowing to 5.1 percent in the second quarter.
The Central Bank of Kuwait expects sector growth for the full year to reach six percent, which would represent the slowest growth since the 5.9 percent posted in 2020 as the economy was hit by the coronavirus.
Central Bank of Kuwait data shows that banks’ loan book closed August at Sh4.045 trillion, down by Sh154.4 billion from Sh4.199 trillion at the end of last year, reflecting lower lending as well as a decline in the value of dollar-denominated bonds. Loans with appreciation of the shilling against the dollar.
Private sector credit growth slowed to 1.3% in August – the slowest pace in more than five years – while the proportion of non-performing loans rose to 16.7%, the highest in 18 years.
The high level of defaults and low willingness to borrow came in a regime characterized by the high cost of credit, with the benchmark lending rate reaching a 12-year high of 13 percent in February this year.
The Central Bank of Kuwait has begun easing pressure on borrowers through successive cuts to raise the interest rate to 12 percent in an attempt to stimulate borrowing.
The Central Bank of Kuwait said: “The Monetary Policy Committee noted the sharp slowdown in private sector credit and the slowdown in economic growth during the second quarter of 2024. It concluded that there is room for further easing in monetary policy to boost economic activity while ensuring exchange rate stability.”
In the credit survey conducted by the Central Bank of Kuwait in June, 48 percent of credit officers surveyed from 39 banks indicated that non-performing loans were likely to rise in the third quarter ending in September, while 18 percent expected them to remain unchanged. About 34 percent expected a decline.