More than 100 KCB customers who have defaulted on their loans are set to lose their vehicles in auctions expected to fetch the bank over Sh304.4 million.
KCB has put up for sale 119 vehicles at an average reserve price of Sh2.5 million each. The actual amount that the vehicles fetch will be known after closure of the sale on Wednesday this week.
The seized vehicles were offered as collateral for loans, which the borrowers are now unable to repay. Banks have recently stepped up their pursuit of a burgeoning group of defaulters in a bid to clean up their balance sheet and boost their income statements.
Besides KCB, NIC Bank has in recent months auctioned hundreds of vehicles and scores of land parcels and buildings held by struggling businesses and individual borrowers.
Some of the defaulters, who have in the past relied on fresh bank credit to repay old debt, have blamed their circumstances on inability to get new loans in the wake of interest rate controls.
Gross defaults in the banking sector rose 45.5 per cent to Sh214.3 billion in the year ended December, according to Central Bank of Kenya (CBK) data.
The sharp jump in non-performing loans has eaten into the banks’ capital and profitability as they impair or provide for the bad loans.
Nearly all the vehicles being auctioned by KCB are trucks, tippers and prime movers, indicating that a significant number of firms in transport, trade and construction sectors are in trouble.
KCB’s gross non-performing loans stood at Sh33.2 billion in the half year ended June, rising marginally from Sh32.9 billion the year before.
The bank’s loan loss provision however declined to Sh2.01 billion from Sh2.06 billion over the same period. The lender’s net profit remained flat at Sh10.2 billion as a lower tax bill and reduced interest expenses cancelled out a drop in interest income and higher operating expenses.
Sale of the vehicles is the latest effort by KCB to clean up its books. The lender has also sought to recover billions of shillings owed by big names including collapsed construction firm Spencon and the estate of the late tycoon Tahir Sheikh Said (TSS).