Kenyan banks saw their balance sheets shrink in Q1 2024 as foreign currency loans and government securities decreased, the Central Bank of Kenya said.
The sectors assets shrank 2.7% to $58.2 billion (KES7.5 trillion) in the three months to March, driven by an 18.5% decline in foreign currency loans to $7.6 billion. The banks also cut their holding of government securities by $474.3 million (KES61 billion).
The decline in banks assets could signal a reduced appetite for dollar-denominated loans as the shilling strengthened and a tightening of credit conditions for borrowers as lenders seek to shore up their balance sheets amid a tough macroeconomic environment.
Net loans and advances remained the main component of total assets, accounting for 49.4% in the first quarter of 2024, a decrease from 49.7% recorded in the fourth quarter of 2023, CBK said.
The banks offloaded short-term bonds to reduce fair value losses, which happens when they sell the securities at a lower price than they purchased. This came as the CBK tightened its monetary policy to curb inflation, which affects bond prices.
