Banks posted a profit before tax of Sh53.9 billion in May, a drop of 23 per cent compared to the Sh70 billion they made during a similar period last year, new industry data shows.
As a result, the return on equity (ROE), a profitability ratio investors use to measure what shareholders receive for every shilling they invest as equity in a bank, dropped to seven per cent from around 10 per cent last year.
The reduced profitability was largely due to the negative effects of Covid-19, which has seen a lot of banks set aside billions of shillings as insurance against the possible surge in bad loans.
Bad loans, technically known as non-performing loans (NPLs), rose by Sh40 billion during the period under review to Sh378 billion. As a percentage of total loans, NPLs were at 13 per cent compared to 12.9 per cent in May 2019.
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