Victoria Commercial bank suffers bad loans for the first time in over 10 years

NAIROBI, KENYA: Mid-sized lender Victoria Commercial Bank (VCB) has reported non-performing loans in its books of accounts for the first time in over a decade.

Latest filings for trading of the six months to June 2017 show that gross non-performing loans and advances to customers moved from zero to Sh18.4 million, making it historic for the bank that has enjoyed an excellent credit history for over 10 years.

However, this is just 0.12 per cent of the Sh15.5 billion net loans and advances to customers as at June 30, 2017.

Against this backdrop, the Nairobi's Upper Hill- headquartered bank with 72 employees narrowly increased its loan loss provisions by 0.46 per cent to Sh7.06 million.

Many lending institutions in the country are grappling with soaring bad loans. Latest economic indicator by Central Bank of Kenya show that non-performing loans increased by 21 per cent to Sh230.6 billion in a year to April 2017.

The bank, with just three branches located in Nairobi- Upper hill, Industrial area and Westlands- has been given a stable outlook by Global Credit Rating Company (GCR) based on among other parameters a successful relationship- based niche private banking model.

"The bank has maintained an excellent credit history, with no loans classified as non-performing for over a decade. The bank's outstanding asset quality is partly a function of the niche market in which it operates," said GCR in previous rating.

It has been hailed for its stringent credit origination standards and proactive post disbursement monitoring to ensure it only works with clients who can service loans.

As at end of June, its customer deposits stood at Sh15.8 billion while total assets were Sh22.9 billion. It offers both personal and corporate banking with the cheapest account requiring a minimum balance of Sh10,000.

Its profit after tax grew by 11.5 per cent to Sh307.8 million, defying the prevailing trend in the market where most banks have posted a drop in net earnings owing to the cap on interest rates.

Despite its net interest income dropping 5.5 per cent to Sh1.19 billion, the bank shored up its earnings by growing non-interest income by 26.3 million and cutting interest expenses by 18.4 per cent or Sh129 million.

The bank reported healthy capitalisation ratios when compared to the statutory requirements. Its core and total capital adequacy ratios are above minimum statutory requirements by 14.5 and 11.2 percentage points.