Managing Director attributes the 12 per cent dip to macro-economic and political challenges in 2017

A section view of Barclays bank (PHOTO: BEVERLYNE MUSILI|STANDARD)

Barclays Bank of Kenya saw third quarter profits dip by 11.6 per cent as its net revenues dip stretched to two years.

Net profits for the nine months to September stood at Sh5.3 billion, down from Sh6 billion in a similar period last year.

In 2016, the bank saw its profits dip 10 per cent and fortunes still seem grim as the lender heads into the final quarter.

“This year has presented us with a multiplicity of challenges on the macro-economic and political fronts, which have had a direct impact on our revenues,” said Barclays Bank of Kenya Managing Director Jeremy Awori.

“The prolonged electoral period has presented a climate of uncertainty, which has been challenging for businesses, while the interest rates law continues to undermine our interest income.” 

Barclays’ books also took a beating from other interest income, which fell from Sh1.7 billion to Sh27 million in 2016.

The bank however weathered the storm of interest rate caps as retail and corporate loans brought in Sh15.9 billion by September, up from Sh15.5 billion last year.

In fact, loans issued to customers grew by Sh9 billion to stand at Sh167 billion at the end of the period under review.

Third quarter

But fees and commissions from loans halved from Sh1 billion in September 2016 to Sh532 million in the third quarter this year.

The lender, which has cut costs by shedding 130 workers, saw staff costs jump from Sh7.3 billion to Sh8.1 billion in the nine months to September. This could be the cost of retrenchment, which requires more resources for send-off packages.

Subsequently, the bank has reduced its lending to employees from Sh13.2 billion to Sh12 billion.

Barclays, which shut down seven branches this year, saw its rental costs dip marginally by Sh29 million. Property and equipment booked under assets fell from Sh3.2 billion to Sh2.9 billion.

The bank did well in managing its bad loans, which grew by Sh1.5 billion, allowing it to reduce provisioning from Sh3.1 billion to Sh2.3 billion.

The MD attributed this to concerted efforts to attain the highest level of underwriting standards as well as enhanced internal efficiencies on the collections and recoveries fronts.

Provisioning will, however, be a different ball game next year, when International Financial Reporting Standard 9 comes into force next year. This requires banks to recognise expected losses for a loan over its entire lifetime.