Barclays Bank Kenya has recorded a 10.2 per cent drop in its half-year 2016 profit. This follows an increase by the bank in its loan loss provisions by more than three times. 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 Sh.2.8 billion.
During the period, the bank was holding Sh.19.4 million more customer deposits than it did in June 2015. The bank’s total operating expenses grew by 24 per cent to Sh.10.4 billion. This was largely due to loan loss provisions growing by more than three times to Sh.2 billion. Directors’ emoluments also went up more than five times to Sh.65.3 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 utilizing assets. Non-performing loans, which continue to grow in the banking sector, reached Sh.8.8 billion, translating to an increase of 47 per cent compared to what Barclays had in its June 2015 books.
