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Barclays Bank half-year profit drops by 10per cent over debt provisions

By Patrick Alushula | August 29th 2016
Barclays Bank Kenya has increased its loan loss provisions by more than three times to record a 10.2 per cent drop in net profit for the half year period ended June 31, 2016. PHOTO: COURTESY

Barclays Bank Kenya has increased its loan loss provisions by more than three times to record a 10.2 per cent drop in net profit for the half year period ended June 31, 2016.

In the six months, the after-tax profit was Sh4.09 billion, a decline from Sh4.6 billion posted in a similar period last year.

According to the bank’s Managing Director Jeremy Awori, the results are satisfactory given the challenging environment the lender operated in.

“The perceived impact of the news of Barclays PLC reducing their investment in Barclays Africa at a time when the industry was facing a confidence crisis following the placement of three banks under statutory management was critical for us to manage,” he said.

The bank, which is listed on the Nairobi Securities Exchange (NSE), was the only one among its peers to record a drop in interest income from Government securities despite the attractive rates during the period. The bank made Sh2.57 billion, being 8.9 per cent lower than what it made in a similar period last year.

Nevertheless, a 15 per cent rise in interest income from loans and advances to Sh10.2 billion lifted the lender’s total interest income to Sh13.9 billion. This was a growth of 14 per cent.

The bank also grew non-interest income by 7.4 per cent to Sh5.13 billion. This lifted non-interest income to 32 per cent of total earnings in a period that saw year-on-year growth in income from Bancassurance and foreign exchange trading grow by 275 per cent and 54 per cent respectively.

Awori said the growth in non-interest income is a proof that the bank’s diversification strategy is on track. At that level, it is beaten by CfC Stanbic whose share of non-interest income is 42 per cent of total earnings.

Increased customer deposits pushed up Barclays’ total interest expense by 32 per cent to Sh2.8 billion. During the period, the bank was holding Sh19.4 million more customer deposits than it did in June 2015.

The bank’s total operating expenses grew by 24 per cent to Sh10.4 billion. This was largely due to loan loss provisions growing by more than three times to Sh2 billion. Directors’ emoluments also went up more than five times to Sh65.3 million.

Despite the increased costs, the bank managed to marginally cut its cost to income ratio from 53 per cent to 52 per cent signaling improved efficiency in utilising assets.

Non-performing loans, which continue to grow in the banking sector, reached Sh8.8 billion, translating to an increase of 47 per cent compared to what Barclays had in its June 2015 books.

However, at NPLs to total loan book ratio of five per cent, the bank is significantly lower than the industry rate of 8.2 per cent.

During the period under review, assets grew by 9.3 per cent to Sh256 billion, while liabilities rose by 8.9 per cent to Sh217 billion. However, shareholders’ fund reached Sh39.1 billion, a growth of eight per cent.

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