State lenders maintain loss streak as small banks struggle

Smaller lenders continue to feel the pinch of the rate cap regime, with a majority of them posting losses and others a marked decline in profit.

National Bank (NBK) of Kenya in its financial report for the 12 months to December last year released yesterday said it made Sh7 million net profit, a 98 per cent fall from the Sh410 million reported in a similar period in 2017.

Loans to customers during the period under review declined from Sh57 billion to Sh47 billion, out of which Sh31 billion was in default.

Another State lender, Consolidated Bank sunk further into losses, posting a Sh540 million loss last year, up from a loss of Sh334 million in 2017.

Development Bank also owned by the government, on the other hand, sunk from a Sh9 million profit in 2017 to a Sh5.8 million loss last year.

Tough environment

Things were no better for Housing Finance (HF), posting a net loss of Sh598 million from a profit of Sh126 million last year after loans to customers declined from Sh49 billion to Sh43 billion.

Group Chief Executive Robert Kibaara said the bank had embarked on an aggressive business transformation strategy to turn around performance and accelerate growth to profitability by end of 2019.

The government plans to merge the three flagging banks - NBK, Consolidated and Development - but recent developments indicate they may have to brave the tough operating environment with different strategies. Development Bank of Kenya will be merged with Kenya Industrial Estates, Uwezo Fund, Youth Enterprise Development Fund, Women Enterprise Development Fund and IDB Capital Ltd.

Consolidated Bank wants a strategic investor to pump in Sh3.5 billion and take a controlling position in the bank while National Bank’s recovery strategy is yet to be established. Conversely, Family Bank, which had posted a loss of Sh1 billion in 2017, rebounded to a profit of Sh244 million last year on the back of a turn-around strategy that saw it push lending from Sh43 billion to Sh44 billion mainly on its mobile application.

“Last year, the bank invested heavily in revamping our PesaPap mobile application and greatly enhanced the features as well as the customer journey and experience. We have advanced over Sh1.2 billion through the app since the launch of the mobile lending service in July 2018,” said Family Bank Chairman Wilfred Kiboro.