DEFAULTERS

Family Bank blames Sh8.3bn loan defaults on pending bills

Government contractors and suppliers are among the biggest defaulters, according to the bank.

In Summary

•Customers mainly contractor and suppliers doing business with government have not been paid hence high default rate, Family Bank chairman Wilfred Kiboro says.

•The bank however more than tripled its net profit for the nine months which closed at Sh704.7 million compared to Sh187.8 million same period last year.

Family Bank has attributed the rise in its Non-performing Loans (NPLs) portfolio to defaulting government contractors and suppliers who are owed billions in pending bills.

The lender yesterday reported Sh8.3 billion in gross NPLs and advances to customers for the year to September, aup from Sh8.2 billion reported in the same period last year.

This is despite more than tripling its net profit for the nine months which closed at Sh704.7 million, compared to Sh187.8 million over the same period last year, buoyed by higher loan uptake, steady growth in customer deposits and growth in operating income.

 

“NPLs are still higher than they should be. Customers,mainly contractors and suppliers doing business with government have not been paid,” chairman Wilfred Kiboro told an investor briefing in Nairobi.

“The government needs to get its act together to pay their suppliers and contractors so that in turn, they can be able to pay their loans,” he said.

It is estimated the government owes suppliers and contractors in excess of Sh 178 billion, close to six months since President Uhuru Kenyatta’s June 1 directive that ministries, departments and agencies clear their pending bills to salvage businesses from collapsing.

Banks are on an aggressive loan recovery with hundreds of defaulters having their properties put on auction.

 “It is not the business of banks to give businesses to auctioneers. We are in this sorry state because people who owe other people are not meeting their financial obligations,” Kiboro said.

Head of Civil Service Joseph Kinyua last week directed all government departments to furnish his office with reports on the settlement of the bills.

According to Kinyua, the government has made a commitment  to complete payments by November 30. 

 

“I ask everyone involved to take necessary measures to meet the deadline,” Kinyua said in a memo dated November 19.

Treasury was yesterday reported to have met governors to discuss pending bills.

The bank’s sentiments comes barely three days after manufacturers blamed pending bills for hurting businesses, mainly the supply chain, with ripple effects being felt across the economy.

During the period under review, Family Bank saw its loan book grow to Sh49.3 billion up from Sh44.6 billion same period last year.

It had a loan loss provision of Sh2.6 billion where interest in suspense stood at Sh1.1 billion. This is the amount of interest which is pended from the date when any particular account is considered as Non Performing Assets.

“We took a decision to continue lending our customers despite the interest rate cap and focus of most of the banks investing in treasury bills and bonds. This was very deliberate because we found out there was demand by our customers,” CEO Rebecca Mbithi said.

The bank earned Sh4.4 billion as interest from loans and advances, higher than the Sh4.2 billion it got in 2018.

“Since Q3 of 2018, our earnings have been on steady growth and we thank our customers for the continued support cemented by the growth in their uptake of our products and services. We continue to maintain a strong capital position despite the adoption of IFRS 9 Accounting Standard,” Mbithi said.

The Bank’s liquidity has remained strong at 36.6 per cent, which is above the minimum statutory ratio of 20 per cent.