Mortgage and auto loan defaults cross 100 billion shillings – business daily

0

Capital markets

Mortgage and auto loan defaults exceed 100 billion shillings


A construction site in Nairobi. PHOTO FILE | NMG

BDgeneric_logo

Summary

  • The default on mortgages and loans to the transport sector has crossed the 100 billion shillings mark following layoffs, business closures and travel restrictions triggered by the Covid-19 pandemic.
  • The transportation and real estate sectors topped defaults in the nine months to December last year as the country recovered from an economic crisis caused by the pandemic, new data from the Central Bank of Kenya (CBK).

The default on mortgages and loans to the transport sector has crossed the 100 billion shillings mark following layoffs, business closures and travel restrictions triggered by the Covid-19 pandemic.

The transportation and real estate sectors topped defaults in the nine months to December last year as the country recovered from an economic crisis caused by the pandemic, new data from the Central Bank of Kenya (CBK).

Loans secured by title deeds and motor vehicle logs showed the fastest growth rates by default during the period, coinciding with crippling travel restrictions and a reduction in business operations to curb growth. spread of Covid-19.

CBK data shows that the cumulative value of outstanding loans by the transport and real estate sectors jumped 45.25% between March and December to reach 99.5 billion shillings.

The two sectors also accounted for 46.27% of the 67 billion shillings in new bad loans between March and December of last year, underpinning the huge blows they suffered as a result of the pandemic.

Construction defaults jumped 4.6% to Sh28.6 billion, pushing defaults in the transportation and real estate market to Sh128.1 billion in December from Sh92.5 billion.

Defaults in the transport and communications sector increased 81.43 percent over the nine-month period to 38.1 billion shillings, mainly due to the closure of educational institutions and matatu investors who had acquired vehicles under asset financing agreements.

Real estate recorded a 29.2 percent jump in bad loans between March and December to 61.4 billion shillings, largely due to job losses.

The majority of Kenya’s mortgages – which stood at 27,993 accounts valued at 237.7 billion shillings in December 2019 – were secured by wages.

“This (the rise in bad debts among borrowers in the transport sector) is purely the result of a macroeconomic shock resulting from this reduced economic activity, such as reduced movement of people which has hampered their ability to repay loans. “said Raphael Agung, chief economist of the NCBA group. , said Tuesday.

“For the mortgage portfolio, service capacity has been largely compromised by job losses.

Growing defaults in the real estate market reflect the struggles mortgage holders are facing in an economy that has seen a series of job losses in recent months in almost every industry as companies step up austerity measures to protect their profits.

This has seen workers who took out mortgages on the basis of their pay stubs to default. The real estate slowdown penalizes real estate developers who find it difficult to sell homes built on credit.

Banks have stepped up their debt collection efforts to clean up their loan portfolios, leading to an increase in foreclosures of property and cars.

Pandemic restrictions

Overall, gross non-performing loans (NPLs) increased from 357 billion shillings at the start of pandemic restrictions in March to 424.1 billion shillings in December 2020, equivalent to 14.46% of the portfolio. industry loans 2.93 trillion shillings.

That figure rose to 432.45 billion shillings at the end of February 2021, according to an updated credit report from the CBK which does not give a sectoral breakdown.

Kenya’s top nine listed banks increased their allowance for nonperforming loans to a record 77.3 billion shillings in the year ended December, reducing their combined net profits by 25.5% to 81.2 billion of shillings.

KCB, Equity, Co-op Bank, I&M, Absa Bank Kenya, NCBA, Standard Chartered Bank Kenya, DTB and Stanbic Holdings have provisioned 109.7 billion shillings during the reporting period, compared to 32.3 billion shillings the last year.

CBK Governor Patrick Njoroge has flagged defaults as the biggest risk to the country’s banking sector.

On March 29, the Monetary Policy Committee (MPC) – the main decision-making body of the CBK – forecast that NPLs are expected to peak at 16% in June, slightly lower than the 17% forecast at the previous meeting two months earlier.

Runaway problem

“It (the NPL ratio) is still in the same size mode, but at least we’re reassured that it’s not some sort of trail problem and that it’s well contained,” Dr Njoroge said on the 30th. March.

The increase in credit problems usually triggers an increase in real estate auctions as banks attempt to seize the assets of defaulters in an attempt to lessen the impact of bad debts on profitability.


Source link

Share.

About Author

Comments are closed.