Jamii Bora Bank has reported an after-tax loss of Sh28.4 million for the nine months to September as high operating expenses and cost of funds dragged the lender into the red.
The tier three lender, which recently said it is considering merging with a local bank in place of a strategic investor, recorded a net profit of Sh61.97 million in a similar period last year.
Jamii Bora’s drop into loss-making territory was occasioned by an increase in total interest expenses which grew by Sh365.5 million to close quarter three at Sh1.09 billion.
Interest expenses on customers’ funds increased by 45.8 per cent to Sh891.6 million despite the fact that these deposits reduced by Sh2.1 billion to Sh9.2 billion in the period.
“Our performance was highly affected by the high cost of deposits. In order to continue lending, we have to continue taking in deposits,” Samuel Kimani, Jamii Bora chief executive, told the Business Daily in a telephone interview.
The lender’s increased interest expenses ate into the bank’s total interest income which increased by Sh496 million to Sh1.7 billion.
Interest income from loans alone went up by 52.9 per cent to Sh1.4 billion, despite the bank’s loan book contracting by 2.5 per cent to Sh9.84 billion.
Jamii Bora’s staff costs went up by Sh10.5 million to Sh333.7 million, an increase which Mr Kimani said was as a result of investment in new branches over the past year.
The lender’s loan loss provision, however, decreased by Sh8.8 million to Sh74.1 million.
Small lenders have come under huge liquidity pressure after the failure of Chase Bank sent customers on a panic withdrawal streak that further stretched bank reserves.