Stanbic Bank Kenya extends relief for customer loan repayment

Kenyan banks have opted to extend relief on loan repayment terms to customers despite the end of the restructure window by the Central Bank of Kenya (CBK) at the start of March.

The loan restructure window enforced by the banking sector regulator to cushion borrowers against the effects of COVID-19 lapsed on March 2 but banks have opted to keep the buffer in place.

Stanbic Bank Kenya which has so far restructured about Ksh.40 billion covering a majority of customer and household loans has kept the door open for further revisions to customer payment terms.

“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.

Further loan restructures will nevertheless be depended largely on a case by case review and assessment by the lenders just as was the case in the initial restructure window.

“A lot of customers have resumed payments indicating they are happy to start meeting their obligations. We will however still continue to accommodate customers and don’t believe we only did this because there was regulation,” added Stanbic Bank Kenya Chief Finance Officer (CFO) Abraham Ongenge.

Non-Performing loans

According to data from the CBK, banks had restructured a total of Ksh.1.63 trillion representing about 54.2 per cent of the entire sector’s loan book including Ksh.333 billion to personal and household loans.

Despite the great review in repayment terms the stock of non-performing loans (NPLs) rose to 14.1 per cent representing credit defaults of about Ksh.423 billion.

Head of Research at Genghis Capital Churchill Ogutu expects banks to remain attentive of the inherent credit risks to keep an open door policy for restructures.

“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.

On the flip-side, Ogutu expects the expanded restructures to cool off rising NPLs in the near term.

“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,” he added.

The CBK has on its part remained cool even as it notes exacerbated credit risks over recent months to instead trail its guns on stability metrics such as liquidity and capital buffers.

CBK Governor Patrick Njoroge has insisted that banks remained prudent on covering potential credit loses to shoo the bulk of credit risks.

“Credit risks remain elevated but that is expected given where the economy is. We have done a scenario analysis, and assuming the economy remains flat over the next three months, NPLs would reach 16 or 17 per cent of gross loans. This numbers would still be manageable,”he said.

Excluding provisions required under new accounting standards, NPLs would have only amounted to 5.7 per cent of gross loans or an equivalent Ksh.171 billion at the end of 2020.