Banking Sector East Africa...

Kwani how thick are things for regional banks like Stanchart and Barclays? Barclays kwa Magufool have cancelled their annual staff party.

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This thread and the four below it ni za bad news, seems things are very BAD

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It seems not only in Kenya…

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Jakoyo likes this

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Hahahaha… Austerity measures

They are not making 6billion .
What is worrying is The lender set aside 3.14 billion shillings for bad credit, three times more than the year-earlier period, as non-performing loans jumped 49 percent to 10.4 billion shillings!

Nothing to worry at all. This is a good thing for Barclay’s. Increasing their NPL provision ( non cash item) reduces their tax obligation which eventually will have a positive effect on their cash outflow position. This will then free up some cash to be invested in risk free treasury bills.

In summary, Barclay’s understand that Cash is King.

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Okiya what is worrying is 10.4 billion shillings was given to Kenyans and the enterprising Kenyans cannot develop and gain returns. Yaani if I go to the bank now, get 10,000,000 I will not be able to get a ROCE of 30%

Not really. Customer borrows from Barclay’s. Does business with GOK. Is not paid on time. Therefore he also doesn’t have money to repay his loan. Barclays moves the loan to Nonperforming. Customer is eventually paid by GOK after several months. Good customer pays Barclays the arrears (cash inflow). However Barclays still maintains his loan in the Non Performing category as required by prudential guidelines. Eventually Barclays profits reduce. Therefore Barclays pays less tax( reduced cash outflow). KRA falls short of tax collection. GOK lacks money to repay suppliers…and the cycle continues.

At the end of the cycle. Customer has made profits. Barclay’s have available cash for risk free investment. KRA collects less tax.

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A very scary graph

Only problem is if an entity has to rely on financial gymnastics to survive, their shelf life is slowly coming. But its coming.
And then remember the bank charges the customer late fees and accrued interest and other costs. These are quite substantial. So he pays a significant price to rescue his security.
Yes it is a cycle.

bank gani inapeana mkopo na payslip sasa?

Not quite.
Recoveries made on NPA’s are written back. Also, an account that had deteriorated and is repaid in part or full is automatically upgraded accordingly. Manual classification & provisioning is being done away with at CBK’s behest.

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Exactly my point.
An account is upgraded accordingly as payment is received. e.g an overdue of 45days where partial payment is received to cover the first installment automatically is upgraded to normal category arrears 15days. same goes for substandard upgrading to watch, doubtful to substandard etc.

Prudential says repayment in full

Full to move it out of NPA. Get it? in my example above that account would move to normal yet it is still NOT FULLY REPAID.

Na keti tu nikifuata ni elimishwe. Masomo ni muhimu sana my village mate.Wangapi wameketi wakifuata kama mimi?

Yes agreed. In your example, the loan would move to Normal because the arrears would be outstanding for 15 days only.

But if the loan was non performing and the guy pays all dues, there is no way it can move to Normal immediately.