Absa Kenya #ticker:ABSA has restructured Sh8.3 billion of loans, equivalent to about 4.25 percent 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 lender also announced repayment breaks of up to three months on all loans as customers hit by cash flow hitches in the wake of coronavirus restrictions seek flexible terms
The lender is the first 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.
The relief, which is being determined on a case-by-case basis, applies to personal loans, mortgages, asset finance, credit cards and business loans.
The Treasury expects economic growth will slow down to three percent or less this year from an earlier forecast of 6.1 percent as the virus saps demand from trading partners like Europe, as well as disrupting supply chains and domestic production.
This has led to layoffs, reduced cash flow for businesses and forced unpaid leaves, which has set the stage for loan defaults.
“We understand that these are challenging times and we are working with our customers to support them get through these extraordinary times,” said Absa Bank Kenya managing director Jeremy Awori.
“In line with this, we have reviewed our credit terms and developed various options that we believe will cushion them against the prevailing financial difficulties.”
Absa did not comment on the potential impact of the loan restructuring on its earnings this year. Its net profit was flat at Sh7.45 billion last year.
Absa had 397,000 loan accounts and 1,079 mortgage accounts at the end of December 2018, the CBK data show.
Customers facing difficulties have also been given an option to reduce their monthly instalment repayments by applying for an extension to their loan tenors.
Other lenders including Stanbic Bank and Standard Chartered Bank of Kenya have made public similar loan reliefs.
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.
Authorities have also reduced value-added tax by two percentage points to 14 percent and proposed eliminating income tax for the lowest earners.