Costs, bad loans hurt Bar­clays net earn­ings

Profit be­tween April and Septem­ber this fi­nan­cial year dropped to Sh6.06 bil­lion from Sh6.40 bil­lion in the same pe­riod last year

The Star (Kenya) - - News - CON­STANT MUNDA @munda­con­stant

Bar­clays Bank yes­ter­day an­nounced net earn­ings in nine months through Septem­ber fell 5.31 per cent on in­creased op­er­at­ing costs and pro­vi­sions for bad debt.

The coun­try’s fifth largest lender by mar­ket share said the net profit be­tween April and Septem­ber 2016 dropped to Sh6.06 bil­lion from Sh6.40 bil­lion in the same pe­riod last year.

The de­cline in profit has been at­trib­uted to op­er­at­ing costs and pro­vi­sions against bad loans that in­creased 24.66 and 45.86 per cent, re­spec­tively, year-on-year.

Op­er­at­ing costs jumped to Sh15.72 bil­lion from Sh12.61 bil­lion in the re­view pe­riod, while it al­lo­cated Sh4.58 bil­lion against loan de­faults from Sh3.14 bil­lion last year.

The bank be­comes the first among the seven tier-one lenders that have so far re­leased their third-quar­ter fi­nan­cial per­for­mance post-rate cap.

Bar­clays said it mo­bilised Sh21.41 bil­lion more in cus­tomer de­posits to reach Sh180.86 bil­lion in Septem­ber from Sh159.45 bil­lion it posted 12 months ear­lier.

Non-funded in­come, mainly from trans­ac­tion fees and com­mis­sions, rose 16.26 per cent to Sh7.58 bil­lion from Sh6.52 bil­lion pre­vi­ously.

The lender, con­trolled by its UKbased par­ent firm through its African busi­ness unit which it is grad­u­ally dis­pos­ing off, said loan book ex­panded by Sh19.84 bil­lion in the nine-month pe­riod to close at Sh158.84 bil­lion in Septem­ber com­pared to the year.

This helped grow net in­ter­est earn­ings by 10.92 per cent to Sh16.86 bil­lion from Sh15.20 bil­lion.

To­tal non-per­form­ing loans – in de­fault for more than three months – in­creased 36.73 per cent to Sh7.78 bil­lion, prompt­ing the huge loan loss pro­vi­sions.

The cap­ping of in­ter­est on loans at four per­cent­age points above the 10 per cent Cen­tral Bank Rate ( 14 per cent) has put pres­sure on bank’s profit mar­gins, which are 70 per cent driven by in­ter­est earn­ings. This has piled pres­sure on lenders to en­hance op­er­a­tional ef­fi­cien­cies to cut costs through in­no­va­tion and ef­fi­ciency.

KCB, the largest by mar­ket share, has main­tained its lead in prof­itabil­ity in the nine months pe­riod.

/ENOS TECHE

Bar­clay Bank CEO Jeremy Awori at the launch of fi­nan­cial bro­ker­age sub­sidiary in Nairobi on Oc­to­ber 7

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