Banks feel the heat as rate cap trims quarter one profits

Family Bank Managing Director David Thuku


banks_feel_the_heat_592ef91610ef7 Banks feel the heat as rate cap trims quarter one profits
Family Bank Managing Director David Thuku

Deadline day for posting results yesterday saw several banks release poor results in the first quarter of this year as the full impact of the rate cap regime starts to kick in.

According to Central Bank of Kenya, significant slowdown in credit growth has eaten into banks’ profitability with the sector profits before tax for February standing at Sh20.4 billion, down from Sh26.3 billion posted during a similar period last year and Sh49.1 billion in 2015.

Family Bank was one of the biggest casualties, with its fortunes going into  the red to post a Sh259 million loss from a Sh344 million profit during a similar period last year.

The lender, which battled a run on the bank last year has seen its reserve at the Central Bank plunge by Sh3.2 billion.

“A slowdown in lending, a spike in non-performing loans, lower lending yields driven by reduced economic activity and the interest rate cap impacted Family Bank’s performance for the three months’ period ,” said the bank in its financial statement. Spire Bank, which incurred heavy losses last year, has made a partial recovery that was enough to pull it out of the red.


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The lender posted a Sh99 million loss in the three months to March this year from a Sh135 million loss last year. ABC Bank’s first quarter profits, on the other hand, fell by a half from Sh80 million last year to Sh40 million in the period ended March while Commercial Bank of Africa (CBA) saw its profits dip from Sh1.6 billion last year to Sh1.4 billion by March this year.

First Community Bank for its part recorded a Sh44 million after tax profit for the first three months of this year, down from Sh56 million in 2016 while Paramount Bank’s profit fell from Sh38 million to Sh15 million in the first quarter of 2017.

Bank lending has grown by an average of four per cent for about a half a year since August last year when President Uhuru Kenyatta signed the law the capping interest rates.

The regulator has also been tough on banks to correctly classify loans, which has grown non-performing loans to Sh228 billion by February this year.

“The slip in profitability and growth in non-performing loans was largely occasioned by numerous factors that have negatively affected the banking sector as a whole,” Family Bank Managing Director David Thuku, said in a statement.

The lender said it had slowed down on lending to focus our efforts in strengthening its liquidity position.

The banks join the growing list of lenders including Kenya Commercial Bank, Co-operative Bank, NIC Bank, Stanbic Bank, Habib Bank, Habib Bank, AG Zurich, GT Bank, I&M Bank, National Bank, Housing Finance and Ecobank that have also recorded a drop in their first quarter profits. 


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