Lenders optimistic on NPLs fall as recovery efforts go up

Central Bank of Kenya. FILE PHOTO | NMG

By CHARLES MWANIKI
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SUMMARY

• Thirty-eight percent of lenders told Central Bank of Kenya (CBK) in the June 2021 credit officer survey that they see NPLs coming down in the current quarter ending September, an equal number to those who expect NPLs to rise in the quarter.
• The remaining 24 percent expect NPLs to remain constant by the end of this quarter.Fewer banks expect non-performing loans (NPLs) in the sector to increase in the third quarter of the year compared to the second, citing enhanced recovery efforts on personal, real estate, transport and trade loans.

  Thirty eight percent of lenders told Central Bank of Kenya (CBK) in the June 2021 credit officer survey that they see NPLs coming down in the current quarter ending September, an equal number to those who expect NPLs to rise in the quarter.

  The remaining 24 percent expect NPLs to remain constant by the end of this quarter.

  This is an improvement on the 53 percent who in the March credit survey had told CBK they expected an increase in NPLs by end of June, largely due to the renewed Covid-19 containment measures that were announced in late March.

  In March, 32 percent of lenders expected NPLs to go down, while 16 percent projected they would remain unchanged.

  “Thirty eight percent of the respondents indicated that NPLs are likely to fall in the third quarter of 2021. This is attributed to enhanced recovery efforts being implemented by most banks,” said CBK.

  “For the quarter ending September 30, 2021, banks expect to intensify their credit recovery efforts in eight economic sectors. The intensified recovery efforts are aimed at improving the overall quality of the asset portfolio.”

  By the end of June, the ratio of non-performing loans to total loans in the banking sector stood at 14 percent, down from 14.6 percent at the end of March.

  In nominal terms, the stock of bad debt fell by Sh8.5 billion to Sh435.4 billion between March and June.

  Banks have been relying on recovery measures that include auctions to cut the stock of bad loans, while also exercising more prudence in lending to risky customers.