Kenyan Banks Poised for Fastest Credit Growth in Six Years

(Bloomberg) -- Credit growth at Kenya's largest banks is set to expand at the fastest pace in six years as they shift cash parked in government securities to lending to the private sector.

Lenders in East Africa's biggest economy were stymied as regulatory decisions hampered their ability to price risk. The central bank is now expected to clear more risk-based pricing proposals by banks after two years of discussions, which should result in lower double-digit loan-book growth, according to Churchill Ogutu, an economist at IC Group.

Banks and businesses have taken a wait-and-see approach ahead of the general elections in August, after which activity should pick up, Ogutu said by phone. 

Some of the bigger lenders expect their proposals to be approved soon, said Ronak Gadhia, EFG Hermes director for sub-Saharan Africa banks. 

Equity Group to Switch $3.5 Billion from Treasury Paper in 2022

A law to cap lending rates, followed by two years of discussions on risk-pricing proposals, and the pandemic have seen banks move money to government securities. Kenya's biggest bank by market value, Equity Group Holdings Plc has its biggest chunk of cash in government paper at 394 billion shillings ($3.42 billion).

Credit growth accelerated to 9.1% from 1.55% in June 2017, while bad loans were at 14% in February, according to central bank data.

KCB Group Aims for Higher Dividend in 2022 After Tripling Payout

Income-oriented investors will seek to buy stocks like Standard Chartered Bank Kenya Ltd., Absa Bank Plc, Equity Group and KCB Group Plc, Ogutu said. 

“Banks will continue having firepower for dividend payouts as they coming out of the pandemic period,” he said.

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