Home » Lender linked to Kenya’s richest families to raise interest rates for second time

Lender linked to Kenya’s richest families to raise interest rates for second time

by Yusuf Abdulfatai
Uhuru Kenyatta

NCBA Group, a financial services conglomerate with prominent shareholders from some of Kenya’s richest families, has announced plans to increase the cost of its loans. This decision comes as borrowers face mounting challenges in servicing their credit facilities.

The move follows a previous increase in interest rates by the Central Bank of Kenya (CBK) nearly four months ago. At that time, CBK raised lending rates for both dollar and shilling-denominated loans to 12 percent and 10.5 percent, respectively. NCBA Group responded by raising its interest rates on loans.

Now, NCBA Group has revealed its intention to further raise the interest rates on shilling-denominated loans from 13 percent to 14.5 percent, effective November 1. Similarly, the rates for dollar loans will see an increase, rising from 10.5 percent to 11 percent.

This second rate hike in under four months comes as the share of defaulted loans reached a 16-year high of 15 percent in August, causing concerns among banks lending to customers grappling with rising inflation.

Despite the challenging environment, NCBA Group’s Non-Performing Loans ratio dropped to 13.2 percent as of June, compared to 13.4 percent a year earlier, according to disclosures from the lender.

NCBA Group, as a non-operational holding company, has an extensive network of subsidiaries across various African nations, including Tanzania, Rwanda, Uganda, and Cote d’Ivoire.

The financial conglomerate, formed in 2019 through the merger of NIC Bank Group and Commercial Bank of Africa Group, counts some of Kenya’s richest families among its shareholders, including the Kenyatta, Merali, and Ndegwa families.

With a presence in five countries and 109 branches, NCBA Group recently reported robust financial performance. In the first half of 2023, the company’s profits increased by 20.3 percent, rising from Ksh7.77 billion ($53.6 million) in H1 2022 to Ksh9.35 billion ($64.5 million). This performance was noted across all operational segments.

The group’s income from interest-bearing assets, which includes government securities, loans, and advances, experienced a significant increase, surging from Ksh14.71 billion ($101.45 million) to Ksh24.93 billion ($171.9 million).

Non-interest income, generated from fees, commissions on loans and advances, foreign exchange, and dividends, also saw an uptick, rising from Ksh13.81 billion ($95.23 million) to Ksh14.18 billion ($97.8 million).

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