Family Bank has announced a gross profit of Sh1.4 billion for the financial year ending September 2016 on the back of a leap in net interest income.
The lender saw income from interest grow from Sh5.78 billion to Sh7.9 billion as the loan book jumped by Sh3 billion to Sh55.8 billion in 9 months.
However, a higher interest expense on deposits and increased operating costs saw the profit of the tier two bank drop by 25 percent from Sh2.7 billion over the same period last year.
Family Bank MD David Thuku says the main reason for the drop is the macro-economic environment which resulted in a bigger provision for bad debts.
“In addition, we had to defend our deposits largely after the collapse of Chase Bank leading to a movement of deposits from tier two and three banks to tier one banks…so we had to significantly raise the interests we gave,” says Thuku.
Cost of interest matched the amount in the drop of profit at Sh1.72 billion.
The lender saw a drop in customer deposits by 15 percent from Sh62.7 billion to Sh53.5 billion even as customers’ numbers grew to reach nearly 2 million.
At the same time, growth in deposits through mobile banking channel more than tripled to Sh3 billion monthly from Sh700 million while agency banking deposits jumped to Sh1 billion.
“We are determined to maintain a trajectory of sustainable profit growth – delivering returns above our cost of capital. Therefore the transformation journey which we have started which include early retirement Program and other investments in ICT had been factored in our budgets hence the anticipated slight dip in our 2016 profits,” said Thuku. (Capital FM)