Co-operative Bank of Kenya is among the leading banks in the economic recovery going by the earnings to September last year, according to global rating agency Moody’s.
Moody’s, which has rated the sector as stable, says in its latest outlook report that the portion of defaulted loans will go down in the next 12 to 18 months while profitability rises in line with recovering pace of economic activities.
Co-op Bank, for instance, which had raised its loan loss provisions to reflect the economic hardships that were facing borrowers in the middle of the pandemic, in September posted improved credit quality.
The lender grew its loan book by eight per cent to Sh306.3 billion, coming in the period its net profit rose by 18.9 per cent to Sh11.6 billion.
The other leading banks are KCB and Equity.
“The ongoing economic recovery will enable banks’ loan quality and profitability to rebound from weakened levels, while capital, funding and liquidity will remain strong,” says Moody’s.
The agency has projected the non-performing loans (NPLs) ratio to fall from December’s 13.1 per cent to around pre-pandemic levels of 12 per cent.
The 13.1 per cent ratio for December was the best in 19 months, beaten only by the 13 per cent in May 2020.
Improved loan servicing, Moody’s adds, will sustain moderate credit growth going forward with the General Election putting some constraints.
Moody’s noted that restructured loans for the sector amounted to 16 per cent of their loan book by August last year but those in arrears were just one per cent, “suggesting residual credit risk is contained.”
