There is no recovery in sight yet for Africa’s worst-performing stock market as investors look to bank earnings this month to assess how hard the coronavirus pandemic hit Kenyan lenders, Bloomberg News reported. Net foreign-investor outflows and reduced dollar earnings led the Nairobi Securities Exchange 20 Share Index to slide for seven consecutive months through July, falling to the lowest in 17 years, according to data compiled by Bloomberg.
Kenya’s banks are likely to issue fewer loans this year and boost investments in government debt to safeguard earnings under threat from the fallout of the coronavirus, Bloomberg News reported. That’s the assessment of some analysts after the East African nation’s lenders released first-quarter results that showed lower profit, a surge in loan-loss provisions and a wave of debt restructurings.
Kenya urgently needs to establish a credit-guarantee program to reduce the risk of lending to small- and mid-sized companies battered by the coronavirus pandemic, according to central bank Governor Patrick Njoroge, Bloomberg News reported. Three in four small businesses in the East African economy only have cash to cover two months of requirements, Njoroge said, citing an April survey.
Kenya’s biggest bank by assets, KCB Group, has restructured more than 110 billion shillings ($1 billion) of its loans to customers and up to a quarter of its book could be affected by mid-June, its chief executive told Reuters, Reuters reported. The central bank allowed lenders in the East African nation to offer relief to distressed customers in mid-March after the first COVID-19 case was reported. Total restructured loans for the industry stood at 273 billion shillings, 9.6% of the total, at the end of April, the central bank said in a presentation sent to the media on Thursday.
The Tanzanian unit of Kenya’s ARM Cement Plc has been sold to China’s Huaxin Cement company, its administrator PricewaterhouseCoopers and Huaxin said on Wednesday, paving way for completion of one of its production plant, Reuters reported. Huaxin would inject $116 million into the unit, Maweni Limestone Ltd, to settle liabilities, and another $30 million to complete plant construction and upgrade, according to their joint statement. ARM Cement was put under administration in August 2018 by some of its creditors over a $190 million debt and its shares were suspended from the Nairobi bourse.
Kenyan banks are expected to hoard cash as they report a jump in first-quarter loan-loss provisions to cope with the aftermath of the coronavirus pandemic, Bloomberg News reported. Kenyan institutions got a cash boost when the central bank lowered reserve requirements to free up funds for lending, while interest rates have been cut to a nine-year low. Banks have now started restructuring debt for customers hard hit by a drop in business activity because of lockdown-measures aimed at slowing the spread of Covid-19.
Kenya’s economy could shrink by as much as 1% should disruptions caused by the coronavirus pandemic last for about three months, according to the World Bank, Bloomberg News reported. That’s even worse than in 2008, when a cocktail of post-election violence that killed more than a thousand people, drought and the global financial crisis curtailed output in East Africa’s biggest economy. Covid-19 has slashed demand for Kenyan agricultural exports, decimated tourism and is expected to squeeze remittance inflows.
Kenya’s government agreed to loan its cash-strapped national carrier 5 billion shillings ($49.5 million) for working capital and to enable it carry out a scheduled engine overhaul for its E190 Embraer fleet, Bloomberg News reported. Kenya Airways Plc., which is 48.9% owned by the government, is in discussions with the state and other entities in the nation’s aviation industry that include a “possible restructuring of the operations and corporate structure of KQ,” the company said in an emailed statement. The deal is subject to regulatory approvals, it said.
Private equity firm Kuramo Capital risks losing a total of Sh699 million worth of loans it had advanced to TransCentury, the parent company of East African Cables, which is facing a liquidation suit, Business Daily reported. Kuramo provided the loans between 2017 and 2018 and they were mostly secured by 56.7 million shares of the cables manufacturer with a current market value of Sh124 million. The PE firm gave the loans in its capacity as the controlling shareholder of TransCentury where it holds a 25 percent equity.
East African Cables is seeking to restructure nearly a fifth of its bank debt, including a 285 million shilling ($2.83 million) loan to a local lender that has sought to wind it up over the debt, it said on Wednesday, Reuters reported. The court petition by SBM Bank to unwind the company was first reported by local media on Monday. East African Cables makes electric and telecoms cables sold across East and Central Africa. Last year, the company and its parent firm restructured 82% of their debts. “The company...