Kenya's banking sector contracts as assets dip 2.7% to $58bn
TLDR
- Kenyan banks experienced a 2.7% decline in assets to $58.2 billion in Q1 2024, driven by an 18.5% decrease in foreign currency loans to $7.6 billion.
- Banks reduced their holdings of government securities by $474.3 million during the same period.
- The contraction in gross loans, down by 2.8% to $31 billion, was notable in industries like manufacturing, energy, and tourism, primarily due to higher loan repayments.
Kenyan banks' assets fell by 2.7% to $58.2 billion in Q1 2024, reflecting a significant contraction in the sector due to an 18.5% drop in foreign currency loans to $7.6 billion, according to the Central Bank of Kenya (CBK).
Banks also reduced their holdings of government securities by $474.3 million. Net loans and advances constituted 49.4% of total assets in Q1 2024, a slight decrease from 49.7% in the previous quarter.
The contraction in gross loans, which fell by 2.8% to $31 billion, was particularly evident in sectors such as manufacturing, energy, and tourism, largely due to increased loan repayments.
Key Takeaways
The decrease in Kenyan banks’ assets reflects a shifting economic landscape. As the Kenyan shilling strengthened, there was a noticeable reduction in demand for dollar-denominated loans. This trend coincides with tighter credit conditions as banks aim to stabilize their balance sheets amid rising inflation and interest rates. Customer deposits, the primary funding source for banks, also experienced a decline, dropping by $2.2 billion to $42.6 billion amid a rising cost of living and a tough economic environment. Foreign currency deposits were hit hardest, decreasing by 14.6% to $12.4 billion, while local currency deposits saw a minor decline of 0.2%. These developments indicate a cautious approach by both banks and consumers in response to the current economic conditions, underscoring the need for strategic adjustments to navigate the evolving financial landscape
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