KCB writes off, sells bad loans as lender pursues defaulters

Lawrence Kimathi, chief financial officer at KCB. PHOTO | NMG

By DOMINIC OMONDI More by this Author

KCB has been writing off and selling some of its bad loans to reduce its stock of non-performing loans (NPLs) by the end of the year.

The lender expects these actions to reduce its ratio of NPLs — loans which have not been serviced for more than three months — to performing ones to between 15 and 17 per cent in 2022.

KCB’s NPL ratio rose to 21 per cent by June, above the industry level of 15 per cent, before trending downwards to 18.2 per cent in the period ending September.

This was higher compared to an NPL ratio of 13.7 per cent in a similar period in 2021.

READ: KCB joins race of financing Sh3.5 trillion DRC deals

The Central Bank of Kenya data put gross NPLs by the end of September this year at Sh491.8 billion compared to gross loans of Sh3.6 trillion, the industry’s NPL ratio at 13.7 per cent.

Lawrence Kimathi, chief financial officer at KCB, said the lender has rehabilitated some of its non-performing loans and is waiting for the regulatory six months to reclassify them as performing. “Others (NPLs) we have been able to write off. We just make a decision that we have taken provision of these facilities, just write it off from our NPL,” said Mr Kimathi on Monday, adding they continued to pursue recovery.

“Just because you write off doesn’t mean you don’t pursue recovery.”

“Some we are selling off. Some banks would like to take over some of the facilities from us and we are happy to sell off”.

In the past, he identified roads, manufacturing, and hospitality as some of the sectors that have raised the bank’s non-performing loans.

The main culprit in the increase of the NPL ratio in the first half was KCB Kenya, with all the other subsidiaries improving.

KCB Kenya has recently been aggressively going after some of its major defaulters, including Mumias Sugar, Savannah Cement and English Point, as it seeks to reduce its stock of bad loans.

KCB, which is listed, reported a 20.9 per cent growth in net profit in the nine months ended September to Sh30.6 billion, up from Sh25.2 billion last year.

On Monday, KCB announced the completion of the acquisition of TMB for a value estimated at more than Sh15 billion, giving the bank a toehold in the vast mineral-endowed central African country.

KCB has joined Equity Bank in the scramble to finance Sh3.5 trillion trade deals in the DRC as the banking supremacy battle goes regional.

ALSO READ: Savana Cement gets orders barring KCB, Absa from seizing its assets

“Our target for the full year, we had given a range of 15 to 17 per cent. That is what we expected to close the year with and we are working towards that,” Mr Kimathi said.

→ dakure@ke.nationmedia.com