GOK local debt

[wrongturn]

FIVE banks held ksh1.024Trn of GoK debts in 2021.
GoK appetite grew in 2021 v 2020
1. Equity- sh394.1B v sh217.4B
81%
2. KCB - sh276.3B v sh210.8B
31%
3. Co-op- sh184.1B v sh161.9B
13.7%
4. Stanchart- sh91B v sh94.8B
4%
5. ABSA- sh89.2B v sh87.1B
1.3%

TOTAL-sh1.024T
How it impacted their P&L A/Cs:

Comparison of interest income from GoK debt, 2021 v 2020:
1. Equity - ksh29.45B v ksh20.93B
2. KCB - ksh26.5B v ksh23.1B
3. Co-op - ksh18.7B v ksh14.8B
4. Stanchart - ksh9.1B v ksh9.55B
5. ABSA - ksh8.9B v ksh8.2B
Total = ksh92.65B
Good business.

This level of domestic borrowing isn't without impacts. From bank's perspective, it's understandable. The Private sector is risky, GoK papers aren't. It's GoK that should be cutting its appetite for domestic borrowing & not banks restraining from making lucrative investments.
That said, the displacement of private sector from credit market - the crowding out effect is huge. Private sector credit growth remains below 10%. That's not optimal for growth necessary for sufficient growth & job creation.
Consistent job losses in last 9yrs doesn't surprise.
Something I can figure out on Big 5 data:
Customer deposits: ksh2.738T
Loans & advances: ksh1.9337T
Difference = ksh804.3B

But they hold ksh1.024T in GoK debts
***
Investment in GoK debt/Total assets ratio
Equity -30.2%
KCB -24.2%
Co-op -31.75%
Stanchart -27.1%
ABSA - 20.8%
*Error of omission.

NCBA actually comes ahead of stanchart & ABSA in size of GoK debt & interest income from this holding.

NCBA:
Loan-deposits ratio - 51.94%
GoK debt holding - ksh123B v sh87B41.3%
Interest from GoK debt sh19B v sh15B
GoK debt - total assets ratio -26.1%



Including omitted NCBA,
The top six banks - in GoK debt holding.
1. Equity - sh394.1B
2. KCB - sh276.3B
3. Co-op - sh184.1B
4. NCBA - sh123.1B
5. Stanchart - sh91B
6. ABSA - sh89.2B
Total = sh1.147T
Total interest earned=sh111.75B = GoK interest expense

Also interesting, despite Co-op's significantly higher investment in govt securities, interest income is lower.

Investment in govt securities:
Co-op - sh184.1B
NCBA - sh123B

Interest income:
Co-op - sh18.7B
NCBA - sh19.1B

 

[JazzMan]

Someone educate me, how bad is this?

 

[Kdawg254]

Amefanya kazi!

 

[Mwalimu-G]

Note that governments use domestic borrowing to mop up excess liquidity, control inflation.

 

[R_Silver]

Someone educate me, how bad is this?

The main issue here is the crowding out effect that @wrongturn has brought up in his post. The banks would much rather buy govt securities than lend money to local businesses and people, as the returns are certain. The limited access to credit means business can't grow as much as they lack the resources. Even individual development is affected as loans for building homes, fees, etc become harder to access

 

[R_Silver]

Note that governments use domestic borrowing to mop up excess liquidity, control inflation.

Very true Mwalimu, but I don't believe we can say that about GoK and local borrowing.

 

[The.Black.Templar]

The main issue here is the crowding out effect that @wrongturn has brought up in his post. The banks would much rather buy govt securities than lend money to local businesses and people, as the returns are certain. The limited access to credit means business can't grow as much as they lack the resources. Even individual development is affected as loans for building homes, fees, etc become harder to access

But with GOK defaulting loans from international banks, can the local ones say with certainty that they are safe?

 

[R_Silver]

But with GOK defaulting loans from international banks, can the local ones say with certainty that they are safe?

That in my view isn't quite as clear; default would be a case where the treasury has no money to pay. GoK didn't make payments and can fall back on the fact that there is on-going investigations on where the money went. I think it is fair for them not to pay back loans that we didn't even receive because of kina Rotich & Thugge's thuggery.

 

[shocks]

But with GOK defaulting loans from international banks, can the local ones say with certainty that they are safe?

Local currency loans hazina shida, government can print itself out of those loans, foreign currency ndio huwa na risk

 

[Denis Young]

Note that governments use domestic borrowing to mop up excess liquidity, control inflation.

Are you suggesting there was excess liquidity in 2021? Also, was the inflation higher in 2020 than in 2021?

 

[Mwalimu-G]

Are you suggesting there was excess liquidity in 2021? Also, was the inflation higher in 2020 than in 2021?

What did you use to measure "normal" liquidity?

But with GOK defaulting loans from international banks, can the local ones say with certainty that they are safe?

I hope you are aware that banks take risks like any other enterprise.
I hope you are also aware banks collect a lot of taxes obo govt.

 

[It's Me Scumbag]

That in my view isn't quite as clear; default would be a case where the treasury has no money to pay. GoK didn't make payments and can fall back on the fact that there is on-going investigations on where the money went. I think it is fair for them not to pay back loans that we didn't even receive because of kina Rotich & Thugge's thuggery.

This is scary...and you say Uhuru is in control? Really?