Barclays Bank of Kenya has reported a profit before tax of Kshs. 10.4 billion for the year ended 31 December 2017, in a period characterised by political uncertainties due to the prolonged electioneering process, stressed disposable incomes as well as reduced private sector growth arising from the impact of interest rate capping.
During the period under review, customer deposits grew by 4% to Kshs.186 billion with significant contribution coming from transactional account balances which accounted for 68% of the deposits. The bank posted a flat growth in customer loans to close at Kshs.168 billion due to the effects of the Banking Amendment Act which caps interest rates and also the long electioneering period.
While growth in loans was muted, investment in the Government securities book increased by 20%. At business level, the asset book recorded a flat growth in the retail banking segment while business banking improved by 3%.
“The implementation of the interest rate cap compressed our margins and resulted in a decline on our revenues. Currently, our strategy is to close the income gap by increasing sales volumes in the upper segments, increasing our product penetration in our current client base and increasing our focus on transactional banking deposits,” Barclays Kenya Managing Director, Jeremy Awori, said.
The bank‟s average loan loss ratio stood at 1.8% and coverage ratio improved to 70% (68% in 2016) while the statutory provisions remained nil; an indication of adequate provisioning way above the regulatory guidance. Net Interest Income performance for the period dropped by 2% to Kshs 21.8 billion.
Non Funded Income dropped by 10% largely driven by changes in accounting treatment and lower mark to market gains on fixed income trading book. The bank posted an impressive 9% growth in foreign exchange earnings. The Bank costs stood at Kshs 16.8 billion reflecting a 1% drop year on year despite inflationary adjustments and investments. These costs are inclusive of Kshs 500m incurred to meet the Voluntary Exit Scheme (VES) program announced during the year.
“To manage costs, we are making sustainable investments in a number of running initiatives designed to create sustainable efficiencies. These initiatives include the automation of our processing centres, investments in alternate channels and the implementation of branch rationalisation programmes,”said Jeremy Awori, Managing Director. “Our digitization agenda, which is aimed at moving the bulk of transactions to alternate channels such as mobile banking, internet banking and agency banking, is on course with the Non branch transactions stood at 65% up from 45% as at the close of 2016,” he added.
“We do not foresee any significant adverse impact on our capital ratios as a result of the implementation of IFRS 9. We have adequate buffers to cushion the Bank from the provision‟s impact,” said Mr.Awori.
