Equity has restructured Sh92 billion loans, equivalent to about 25 per cent of its net loans at the end of last year, as the lender seeks to cushion customers who have been hit by the coronavirus crisis.
The relief, which is being determined on a case-by-case basis, also includes extension of loan terms to cut monthly instalments and repayment breaks on the full or part of the credit.
The lender is the sixth top bank after KCB, Absa, Co-operative Bank, NCBA Group and StanChart to disclose the impact of the health crisis on its loan book following a loosening of the loan repayment rules by the Central Bank of Kenya (CBK) last month.
“Clients who can demonstrate the impact of Covid-19 on their businesses and the soundness of their business model in the new normal will get reprieve in terms of loan rescheduling and refinancing with up to an additional three years of repayment,” said Equity Bank CEO James Mwangi.
“We believe that by supporting our existing clients, we shall help them keep their supply chains open and functional while maintaining their employees on their jobs,” Mr Mwangi added.
World Bank expects Kenya’s economic growth to slow down to 1.5 per cent this year, and contract by one per cent in the worst case. This is as the disease saps demand from trading partners like Europe and disrupts supply chains and domestic production.
This bumpiness has led to layoffs, reduced cash flow for businesses and forced unpaid leave, which have set the stage for loan defaults.
Equity Bank did not comment on the potential impact of the loan restructuring on its earnings this year.
Its net profit increased 13.8 per cent from Sh19.82 billion in December 2018 to Sh22.56 billion in the year ended 2019. It is yet to release quarter one profits.
The CBK says loans worth Sh273 billion had been restructured between mid-March and end of April.
KCB said it has restructured loans worth Sh110 billion, Absa had done Sh8.3 billion by end of April while StanChart had by start of May reviewed credit worth Sh8 billion.
NCBA Group said it has restructured loans worth Sh35 billion since the start of the coronavirus pandemic.
Apart from allowing lenders to offer relief to distressed borrowers, the Central Bank has also cut lending rates and lowered the ratio of cash that commercial banks are required to hold.