Banks have reaped a record Sh244.1 billion in profit before tax for the full financial year ended December 31, 2022, driven by increased lending, setting the stage for payment of juicy dividends for shareholders.
Lending to the government through Treasury bills and bonds by banks grew by Sh196 billion in 2022, while loans extended to the private sector increased by Sh380 billion during the same period, according to data from the Central Bank of Kenya (CBK).
The 2022 performance is a 25.3 per cent increase from the Sh194.8 billion in profit before tax that the lenders earned in 2021, with earnings from interest on loans and government securities as well as non-funded income growing sharply.
The nine listed banks at the Nairobi Securities Exchange (NSE) paid dividends amounting to Sh51.7 billion in the financial year 2021, which was nearly three times the Sh18.8 billion dividends they paid in 2020.
The increase in profits signals higher earnings for shareholders, coming at a time of high inflation driven by high costs of food, fuel, electricity, and cooking gas. Banks are expected to declare the full-year results by end of March, with annual general meetings following to ratify dividend decisions.
Led by top listed lenders including Equity, KCB, Co-op, NCBA, Standard Chartered, Absa, Stanbic, DTB, and I&M, the banks enjoyed a great 2022 as earnings from trading in foreign exchange rose amid increased demand.
This, however, comes as bad loans continue to weigh down on the banks, which have been forced to aggressively go after borrowers’ properties. Gross non-performing loans rose by 14.2 per cent in 2022, rising from Sh426.8 billion in December 2021 to Sh487.7 billion in 2022, according to the CBK data.
“The banking sector remained stable and resilient in 2022. The sector was well capitalised with core and total capital adequacy ratios of 16.2 per cent and 19 per cent, respectively, as at the end of December 2022,” said the National Treasury.
The performance comes amid a shift to digital lending by banks to reduce operational costs associated with traditional banking. For instance, the value of loans issued digitally by Equity Group rose to 19 per cent of total loans issued in the nine months to September last year.
The record bank profits come at a time when both citizens and businesses reeling under economic deprivation caused by inflationary pressures from disruptions in global supply chains and foreign exchange volatilities.