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Family Bank staff cut costs push lender to issue profit warning

Family Bank has warned that its full-year net profit will fall by at least a quarter following the lender’s decision to retrench an unspecified number of employees.

The mid-sized lender has announced that its net profit for the 12 months to December will not exceed Sh1.48 billion, mainly due to one-off retrenchment costs.

Family Bank made the profit warning Tuesday when it reported that its net earnings for the nine months to September had nearly halved to Sh963.3 million compared to the Sh1.86 billion it made during a previous period last year.

“We would like to bring to the attention of our investors that we will definitely make profit but it will close at lower than 25 per cent of last year,” said Family Bank chief executive David Thuku.

“We are, however, hopeful that the cost containment measures we are embarking on will enable us to remain profitable going forward.”

Family Bank plans to relieve of duty an unknown number of its employees as it restructures to respond to thinned margins for lenders in the wake of a rate capping law that has forced banks to the drawing board.

NIC Bank, Sidian and First Community are some of the other banks that have announced staff cuts.

READ: Anxiety for Kenya bank workers as 1,000 lose jobs in three months

Family Bank closed the nine months of this year with staff costs of Sh2.05 billion, representing a 9.4 per cent growth from the Sh1.87 billion it recorded during a similar period last year.

Family Bank’s interest income from loans grew by Sh2.1 billion to close the nine months to September at Sh7.9 billion.

The lender’s loan book grew by Sh3 billion to close the period at Sh55.7 billion as its customers grew to nearly two million.

Customer deposits during the nine months decreased by Sh10 billion to Sh53.5 billion.

The bank’s chairman, Wilfred Kiboro, said this was a result of capital flight in the wake of Chase Bank’s collapse last year.

However, the bank’s deposits through its mobile platform more than tripled to Sh3 billion monthly from the Sh700 million it averaged during a similar period in 2015.

Mr Thuku said the lender would, going forward, shift its focus to alternative banking channels to weather the low-interest income environment brought about by the capping law introduced in August.

“Currently, we have 93 outlets in 32 counties and will be opening three more branches in Eastleigh, River Road and Wangige. We intend to close out on our target number of 100 branches by end of Quarter One of 2017,” he said.

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