KCB extends customer loan restructures for another year

Lender KCB says it will allow further loan restructures to its most distressed customers for a further year as it keeps cushion measures on clients.

The move which sits outside the prescribed Central Bank of Kenya (CBK) window on loan moratoriums which closed of March 2 is geared at covering customers against a weakened macro-economic environment occasioned by the COVID-19 pandemic.

By the end of 2020, KCB Group says it had restructured Ksh.106 billion in customer loans even as customers revert to the pre-pandemic repayment plans on about Ksh.30 billion of the reviewed portfolio.

“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,” said KCB Group Chief Executive Officer Joshua Oigara.

“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.”

The extended loan restructures are seen as a remedy for the lender’s rising non-performing loan (NPL) ratio which reached an estimated 14.7 per cent of gross loans at the close of 2020.

The bank sees the restructures as ‘the right thing to do’ even as it raises its loan-loss provision to cover the eventuality of defaults by customers.

“We will continue to create support beyond just the one year. A two year agenda is what’s important in our point of view,” added Oigara.

On Wednesday, KCB reported a 22.2 per cent dip in profit across 2020 to Ksh.19.6 billion with loan-loss provision costs driving down earnings having soared by three-fold in the period to Ksh.27.5 billion.

The bank joins its peer Stanbic Bank Kenya in extending moratorium to the repayment of loans by customers beyond the regulator timed window of on year.

At the end of last year, the banking sector disclosed restructures totaling to Ksh.1.63 trillion representing more than half of the entire industry’s Ksh.3 trillion loan book in 2020.

Nevertheless, the restructures did not hold down growth in credit defaulting with the industry NPL ratio hitting 14.1 per cent at the end of the year or an equivalent Ksh.432 billion.

Businesses in trade, manufacturing and real estate carried the bulk of loan restructures by the banking sector.