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