Stanbic Holdings seized assets worth Sh1.04 billion from loan defaulters in the financial year ended December 2024, marking the highest seizures in at least a decade in what reflected the deepening economic strain on borrowers.
The lender reveals in the latest annual report that the value of the repossessed assets during the review period marked a 21.4 percent rise from Sh857 million in the prior year.
The increased repossessions coincided with the period interest rates on loans in the economy rose to levels last seen in 2002, making it difficult for borrowers to keep up with repayments in an economy that grew at 4.7 percent— the slowest pace in four years.
Stanbic’s disclosure mirrors the trend of increased defaults that was witnessed in the sector for the better part of last year when banks increased interest rates in line with the central bank rate (CBR) that stayed at a 22-year high of 13 percent between February and August before it started falling gradually.
The value of repossessed residential houses rose to Sh853 million from Sh614 million while that of vehicles eased to Sh188 million from Sh243 million. Vehicles and residential houses continue to top the list of properties being auctioned in the market.
“Assets foreclosed as at the end of the year comprise saloon vehicles, prime movers and trailers, which had been financed by the group under vehicle and asset finance (VAF) and residential property financed under personal markets,” said the lender in the latest annual report.
The Central Bank of Kenya raised the central bank rate (CBR) to a 22-year high of 13 percent where it stayed between February and August last year, resulting in increased monthly loan servicing costs.
Borrowers who had tapped loans on the strength of their payslips were also beset by increased State deductions towards social healthcare and retirement savings in an environment where workers have suffered inflation-adjusted pay cuts for five straight years.
Last year saw compulsory deductions towards healthcare rise from a ceiling of Sh1,700 to 2.75 percent of gross pay following the switch to the Social Health Insurance Fund from National Social Health Insurance Fund. National Social Security Fund contributions also doubled to Sh2,160 to add to the housing levy of 1.5 percent of gross pay that started in 2023.
Stanbic’s repossessions would have been higher had the lender not supported customers through renegotiations that saw some of the borrowers allowed to reschedule payments instead of losing their assets through auctioneers’ hammer.
Stanbic report shows it renegotiated terms of VAF loans worth Sh135 million or 55 percent more than the Sh87 million renegotiated in the prior year. Other loans and advances renegotiated during the year were Sh2.79 billion compared with Sh2.69 billion in the preceding similar period.
“Renegotiated loans and advances are exposures which have been refinanced, rescheduled, rolled over or otherwise modified following weaknesses in the counterparty’s financial position, and where it has been judged that normal repayment will likely continue after the restructure,” said the lender.
The situation is now flipping in favour of borrowers with CBK continuing to cut the CBR. Cumulatively, the CBK has lowered the CBR five times —between August 6 last year and April 4 this year— by three percentage points to 10 percent. This has seen banks respond by lowering the lending rates.
