With the rate cap now a permanent feature in the banking sector after legislators shot down a proposal to have it scrapped, lenders are finding new ways to make money.
According to a new research by Sterling Capital, banks have now shifted their focus on non-funded income (NFI), with Stanbic Bank recording the highest growth on this front at 32.5 per cent in the first six months of this year.
This propelled the bank’s revenue upwards, recording a 105.9 per cent growth in profit after tax to Sh3.5 billion, with interest income rising 15.8 per cent. “The bank has developed innovative digital financial solutions such as M-Shares, Till2Bank and LIPA360 payment solutions targeted at both their retail and SME (small and medium enterprise) clients and we expect this to improve customer experience and drive NFI,” said Sterling Capital in a brief to investors.
Non-funded income is usually derived from bank charges, transaction fees and monthly account service charges.
Kenya Commercial Bank (KCB), on the other hand, saw its non-funded income remain flat at Sh11.5 billion, with a 15.2 per cent gain on other incomes to Sh1.9 billion, offset by a 36.9 per cent decline in fees and commissions from loans and advances to Sh1.3 billion.
Close rival Equity Bank saw its non-funded income grow as a key focus for the bank, with fees and commissions from non-branch transactions expected to drive income in the second half of the year.
Co-operative Bank, however, saw non-funded income decline 2.8 per cent to Sh6.9 billion, mainly attributable to a 41.4 per cent decrease in fees and commissions on loans and advances.
Loan fees and commissions came down to Sh800 million, which offset an 11 per cent gain in other fees and commissions to Sh4.3 billion.
Diamond Trust Bank’s net profit rose 10 per cent to Sh3.8 billion on an eight per cent growth in NFI to settle at Sh.2.7 billion.
Barclays Bank’s 6.2 per cent rise in net profit to Sh3.7 billion was also mainly driven by a 7.6 per cent increase in interest income to Sh14.1 billion and 7.1 per cent growth in NFI to Sh4.7 billion.
Standard Chartered’s non- funded income was also boosted mainly by other fees and commissions, which rose 29.4 per cent to Sh2.3 billion.
As a result, profit after tax was up 32.4 per cent supported by a 7.9 per cent increase in interest income to Sh13.7 billion and 11.6 per cent growth in NFI to Sh4.8 billion.
The lenders also increased their cost management to record modest growth in operating expenses.
For instance, Family Bank’s total operating expenses fell by 11.9 per cent, closing the period at Sh3.1 billion from Sh3.5 billion, while income grew to Sh210 million on increased fees and commissions.
Customer deposits, on the other hand, grew to Sh47.8 billion. Banks have also stepped up loan recovery efforts and slowed down issuing loans, which has in effect locked premium clients.
There was a marked increase in asset quality with all the banks recording a worsening non-performing loans ratio.