Connect with us

Hi, what are you looking for?

Capital Business
Capital Business

Finance

Non-performing loans will get worse before economy improves: Moody’s

Moody’s review projects a recovery of the economy in the second half of 2018.

NAIROBI, Kenya, Jun 3 – Non Performing loans are expected to be on the rise in 2018, global rating agency, Moody’s, reports.

In their new report released on Tuesday, Moodys attributes this to hits the economy experienced in 2017 including adverse weather conditions that affected agriculture and a prolonged electioneering period.

By the end of 2017, nonperforming loans reached 10.1 percent of total loans, up from 6 percent at the end of 2015.

Moody’s review, however, projects a recovery of the economy in the second half of 2018.

According to the report Kenya’s Private sector credit growth is expected to remain below 5 percent in 2018 even as it stood at just 2.4 percent in December 2017.

The Agency says despite Kenya’s economic rebound that will help banks to expand loan growth over the next 12-18 months, it currently remains constrained by the government cap on lending rates.

The government has however indicated plans to review the Interest rate capping that was administered in 2016.

“Operating conditions are improving in Kenya, with real GDP growth forecast to rise to 5.6percent this year as business confidence returns and agriculture recovers following last year’s drought,” said Christos Theofilou, a Moody’s Vice President – Senior Analyst. “We expect credit growth to also rebound, but remain low due to tighter bank lending criteria.”

The Agency expects the banks to maintain an average return on assets close to 3.2 percent from 2.67 percent in December 2017.

“Better operating conditions, strong capital and funding profiles will shield Kenyan banks despite high asset risks,” the firm notes.

Advertisement. Scroll to continue reading.

Kenyan banks’ profitability is one of the highest regionally and globally, providing a strong recurring buffer against high asset risk.

According to Moodys, Kenyan banks sovereign exposure will remain high over the coming quarters, given the Government’s strong appetite for debt and sluggish private-sector loan growth.

“The rating agency also expects Kenyan banks to maintain their capital buffers and deposit-funded profile – key credit strengths – over the next 12-18 months,” reads the report released Tuesday.

Click to comment
Advertisement

More on Capital Business

Executive Lifestyle

NAIROBI, Kenya, Mar 12 – The country’s super wealthy individuals are increasing their holding of bonds, gold and cash, a new report by Knight...

Ask Kirubi

NAIROBI, Kenya, Mar 9 – Businessman and industrialist Dr. Chris Kirubi has urged members of the public to exercise extreme caution when making any...

Ask Kirubi

NAIROBI, Kenya, Mar 24 – Businessman and industrialist Dr. Chris Kirubi is set to own half of Centum Investment Company PLC, following a go-ahead...

Headlines

NAIROBI, Kenya, Mar 18 – Commercial Banks have been ordered to provide relief to borrowers on their personal loans, with loans eligible from March...

Ask Kirubi

It is without a doubt that the COVID-19 pandemic has caught the whole world by surprise. Although its full impact is yet to be...

Kenya

NAIROBI, Kenya, Jun17 – Kenya’s tea leaves manufacturer Kericho Gold, has been awarded the Superbrands Seal by Superbrands East Africa for their quality variety...

Coronavirus

NAIROBI, Kenya, Apr 13 – As the local telecommunications industry gears up to roll out 5G networks in the country, the Communications Authority of...

Coronavirus

NAIROBI, Kenya, Mar 22 – Airtel Kenya is offering free internet access for students in order to enable continued learning at home in the...