Kenyan banks declare super profits amid difficult market conditions

Kenyan banks have reported staggering profits and record dividends to shareholders for the year ending December 31st, despite the country's economy still grappling with the aftermath of the COVID-19 pandemic. The CEO of the Kenya Bankers Association, Habil Olaka, shed light on the drivers behind this impressive performance in an exclusive interview with CNBC Africa. Olaka highlighted that while other sectors of the economy are facing challenges, the banking industry has shown remarkable resilience and growth. The total profitability of Kenyan banks for 2021 is estimated at approximately 198 billion shillings, an 84% increase from the previous year. This exceptional performance has sparked curiosity about the underlying reasons behind the sector's success amidst turbulent economic conditions. Olaka attributed the banks' robust performance to various factors, including the implementation of FRS 9 reporting and support from the Central Bank during the pandemic. He emphasized that the restoration of a conducive regulatory environment in 2019 played a vital role in enabling banks to better price risks and support customers effectively. Additionally, Olaka noted that strategic measures such as loan restructuring and moratoriums on interest payments helped borrowers navigate the financial challenges posed by the pandemic. The prudent management of provisions and risk assessment models also contributed to the improved performance of banks, particularly in managing non-performing loans. While the top tier banks in Kenya have recorded significant profits and dividend payouts, Olaka acknowledged the challenges faced by tier two and tier three banks. He highlighted the importance of enhancing risk pricing abilities and regulatory compliance to facilitate the recovery and profitability of smaller banks. Despite the disparities in performance across different tiers of banks, Olaka expressed optimism about the overall trajectory of the banking sector. He emphasized the resilience and recovery of many borrowers, pointing to a positive trend in portfolio quality as containment measures eased. Looking ahead, Olaka emphasized the importance of continuous monitoring and adaptation to navigate uncertainties and capitalize on emerging opportunities. While some banks may face challenges in the short term, the sector as a whole is poised for growth and sustainability. As Kenya seeks to rebuild its economy post-pandemic, the banking industry's performance serves as a beacon of hope and resilience in challenging times.