Banks still riding high on interest income despite rate cap

A depositor attempts to get some money from the Fontanela Chase Bank branch's ATM in Mombasa soon after all branches country-wide were re-opened under the receivership of KCB, April 27, 2016. Depositors were only allowed to withdraw a maximum of Sh1 million and below.

More than a year after Parliament imposed a rate cap on banks, Kenyan lenders have not figured out a way of making money other than squeezing every cent from borrowers’ pockets.

According to a sample of the biggest lenders, non-interest income, which is money made from fees, commissions and subsidiaries like securities firms, insurance and forex trading remained flat for the first quarter this year.

National Bank, which sunk into the red with a Sh278 million loss in the first three months of the year, saw about 12 per cent drop in non-interest earnings.

Barclays Bank, which posted Sh1.8 billion in profits for three months to March this year - an 8.2 per cent growth from Sh1.7 billion in 2017 - also saw its other revenue shrink. Non-funded income was down 5.5 per cent to Sh2.2 billion from business other than loans.

However, Family Bank, which jumped from negative territory last year to post a Sh35 million profit from Sh259 million loss in the 2017 first quarter saw a 12 per cent improvement in non-interest business to post Sh552 million.

“We are now seeing the results of streamlining our business operations and cost containment as well as our continued investment in technology-based financial solutions that offer our customers convenience and relevance,” said Family Bank Managing Director David Thuku.

I&M pushed up non-interest income from Sh1.3 billion to Sh1.8 billion while Equity Bank (Sh6.7 billion), NIC Bank (Sh1.04 billion), Diamond Trust Bank (Sh1.3 billion) and Co-operative bank (Sh3.5 billion) all saw a slight increase in non-interest incomes.

KCB had a flat growth in non-interest income, a 0.4 per cent increase to Sh5.5 billion.

Listed lenders

The sample of mostly listed lenders also showed that bad loans were a big problem, jumping up by over 100 per cent for certain lenders.

Co-operative Bank saw its bad loans spike 152 per cent to Sh28 billion while those of I&M jumped 134 per cent to Sh22 billion. DTB saw an 82 per cent increase to Sh15.3 billion.

KCB held the largest stock of non-performing loans among the sampled listed lenders at Sh43.7 billion, a 36 per cent rise.