A quarterly report by the Central Bank of Kenya (CBK), indicates that total assets increased by 13.47pc from KES 2.97 trillion in June 2014 to KES 3.08 trillion in September 2014.
During the period under review, Gross loans and advances grew by 7.3pc from KES 1.78 trillion in June 2014 to KES 1.91 trillion in September 2014, while deposits increased 4.65pc from KES 2.15 trillion in June 2014 to KES 2.25 trillion in September 2014.
Total shareholders’ funds increased by 6.37pc to KES 488.66bn, up from KES459.4bn while cumulative unaudited pre-tax profits at the end of the quarter rose to KES 104.54bn compared to KES 92.48bn recorded in June 2013, equivalent to a 13pc increment.
In the period under review, the ratio of total loans to assets was 61.37pc, a slight increase from the 59.47 recorded in the previous quarter.
Lending is the principal business activity for all banks and as a result, credit risk is the single largest factor affecting the soundness of banks and financial systems as a whole. In order to identify potential shocks and enhance understanding of credit risk, the Central Bank of Kenya introduced a quarterly Credit Officer Survey in 2012.
For the quarter ended 30th September 2014, CBK received Credit Survey responses from all 43 institutions currently in operation.
CBK attributes the spike in demand for credit to increased activity in trade, building and construction, real estate, manufacturing personal and household and the transport sectors.
However, mining, financial services, agriculture, energy and tourism sectors were flat while credit demand for building and construction went up 13pc compared to June 2014.
Credit Recovery Efforts
According to CBK, banks tend to increase their credit recovery efforts in the last quarter of the year to improve the overall quality of their asset portfolio.
The greatest recovery efforts will be centered on the building and construction and tourism sectors, followed by the Real Estate, Personal/Household, Manufacturing and Mining and Quarrying sectors.
The intensified recovery efforts in the Tourism, Building and Construction, Mining and Quarrying and Real Estate sectors are in line with the banks expectations that loan defaults in these sectors will rise during Q4of 2014.
“Banks cite heightened political activity, the current spate of insecurity and pending Mining Bill in parliament as reasons for them to intensify credit recovery in the Tourism and Mining and Quarrying sectors,” says the CBK report.
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