Banks restructure payments on Ksh1.7 trillion customer loans as CBK relief window closes

Commercial banks had restructured an estimated Ksh.1.7 trillion in customer loans at the end of February 2021 representing 57 per cent of the sector’s estimated Ksh.3 trillion loan book.

This as part of the Central Bank of Kenya (CBK) granted window to cushion borrowers from the effects of the pandemic through a revision to repayments terms which run over a 12-month period to March 2.

According to the CBK, 95 per cent of the outstanding restructured loans are being repaid in accordance to the restructured terms.

Meanwhile, outstanding restructured loans at the end of February stood at Ksh.569.3 billion according to the new statistics by the reserve bank.

This implies that Kenyans have since cleared Ksh.1.1 trillion of restructured loans over the past year.

At the same time. Kenyans are actively paying up for Ksh.540.8 billion worth of loans covered by restructured loans while only Ksh.28.5 billion are in doubt of turning into potential defaults.

Moreover, the restructure breakdown reveals a rebound in economic activity enabling individuals and businesses to meet outstanding loan repayments.

While terming the restructure measures as effective, the CBK has urged Kenyans carrying restructured but arrears-prone loans to regularize payments with their banks within the next three months or risk defaulting on the loans and subsequent listing with Credit Reference Bureaus (CRBs).

“The period for determining the performance of all the restructured loans will begin on March 3, 2021. These includes the restructured loans that were performing as at March 2, 2020 but went into arrears after that date. Consequently, in accordance with standard procedures, borrowers whose loans were performing before March 2, 2020 but were restructured and subsequently went into arrears, will have three months up to June 3, 2021 to regularize their loans,” stated the CBK.

Extended relief

While the window granted by the CBK to restructure loans has closed, some banks are expected to extend the moratorium beyond the March 2, lapsed deadline.

Stanbic Bank Kenya for instance indicated it would consider further reviews to customers on a case by case basis insisting the pandemic had not been a one off/one year disruption to businesses and households.

“We are fully alive to the lapsing of the moratorium and have had prior discussions with customers. While the majority of customers at about 80 per cent restructured payments by December, we are alive to the fact that, while the moratorium has passed, COVID-19 has not ended,” said the lender’s Chief Executive Officer Charles Mudiwa on March 5.

At the end of December 2020, Stanbic Bank had already restructured terms on loans worth Ksh.40 billion.

On its part, KCB Group says it will consider extending favorable loan repayment terms to the worst hit economic-sectors for a further year as volatility from the pandemic persists.

“You have to be two dimensional in this view. One is on the period it is taking for us to be confident about COVID and secondly, some sectors are being re-opened,” KCB Group Chief Executive Officer Joshua Oigara said last week.

“We are seeing some delayed recovery in sectors such as real estate, manufacturing, tourism and aviation. On trade, education, financial services and energy, that’s already picking up.”

KCB has since the implementation of the moratorium to support borrowers, restructured an estimated Ksh.106 billion at the end of 2020 with clients already resuming regularized payments of Ksh.30 billion.

Head of Research at Genghis Capital Churchill Ogutu has admitted to the importance of further relief on customer loan repayment terms beyond just the prescribed CBK window.

“I would still expect to see banks consider loan restructure requests even as we move from a moral suasion regime where CBK gave the guidance. Right now, banks would still accept restructures based on their one on one relationships with customers,” he said in an earlier interview with Citizen Digital.

“Restructures will help wade-off toxic asset concerns as clients continue servicing loans in move favorable terms. It also allows latitude by banks not to quickly recognize the loans as toxic. This will help stem the tide of rising NPLs at least in the short-term.”