Banks’ net profit through the 12 months to December 31, 2021, rose to Ksh.141.5 billion from Ksh.80.29 billion in 2020.
The profit record is for all lenders listed on the Nairobi Securities Exchange (NSE), as shown by Metropol Harvest.
The rise in earnings is anchored on the returning interest income after the resumption of lending by the sector when the country started easing COVID-19- imposed restrictions.
It is also attributable to trim to loan-loss provisioning costs in which funds are written back to banks’ profit and loss accounts.
During the age of COVID-19, a lot of restructuring happened to cushion banks from increased Non Performing Loans (NPL) provisions, which was improving loan book quality by re-engineering.
Equity Bank recorded the highest earnings in 2021 when its profit doubled to Ksh.40.07 billion from the 2020 earnings of Ksh.20.1 billion.
Expansion in its loan book also contributed to the lender’s profitability rising to Ksh.587.8 billion from Ksh.394.1 billion.
“When COVID- 19 struck, Equity Group sought its true north, its purpose and commitment to supporting its members. The Board and Management decided to focus on saving lives and livelihoods, giving dignity, and expanding opportunities for wealth creation while keeping the lights of the economies on,” said Dr. Mwangi.
The bank has recommended a record dividend pay-out of Ks.3 per share totaling Ksh.11.3 billion which is a 50 percent jump from the previous dividend pay-out.
Equity had skipped the payout in the past two years.
It was trailed by the Kenya Commercial Bank (KCB) whose profits almost doubled to Ksh.34.17 billion from Ksh.19.60 billion.
On the other hand, HF Group has been struggling to balance its books, having dived into financial reds both in 2020 and 2021.
The HF Group is now calling to onboard investors to acquire a stake at the mortgage lender. It is looking to strengthen its capital in line with its current strategy.
As of November 2021, according to the Group’s Chief Executive Officer Robert Kibaara, no transaction had been made after an announcement was published in the company’s 2020 financial statement.
Reginald Kadzutu, an Economic Analyst opines that “when a country has debt-fuelled economy due to a lack of growth in savings and capital accumulation, banks tend to perform better because of the misappropriate gap between the interest paid to savers and interest paid on loans.”
Banks in Kenya and the world over have seen periods of superprofit other than the brief periods of recessions such as the 2008/09 credit crisis.
This points to the fact that banks would ordinarily still generate profits even in periods of not-so-stellar economic growth unless it directly affects the quality of their assets.
Banks make money from the margins they make, from how they source their funding, and what they get out from the loans and other investments they make and how much they pay for the money they loan out, says Kadzutu.
