SUMMARY

  • Non-performing loans went up to Sh4.7b
  • Interest income reduced by 50pc in the first half to June as lending went down.

Family Bank has reported a Sh492 million net loss for six months to June this year due to a 50 per cent reduction in interest income following a slowdown in lending as well as an increase in bad loans.

The bank made Sh711 billion profit after tax during the first half of 2016.

Financial results released yesterday attributed the poor performance to a drop in the interest earned on loans, which fell to Sh3.3 billion over the first half compared to Sh6 billion in a similar period last year.

Family Bank has over the last year slowed down on lending, which is seen in its loan book declining to Sh43 billion from Sh57.7 billion in the first half of last year and Sh50 billion in December 2016.

Loans and advances

Net non-performing loans and advances went up to Sh4.7 billion from Sh2.6 billion in 2016.

While there has been an industry-wide caution in lending since the implementation of the interest capping law in September last year, Family Bank’s lending capability to advance loans might have been affected by a dip in deposits from customers.

The bank’s depositors started getting jittery and made major withdrawals following a tumultuous time in the banking industry that saw a number of struggling lenders put in receivership.

Allegations of complicity in the infamous National Youth Service (NYS) scandal, where more than Sh1 billion of taxpayer’s money was lost, also played a part in eroding confidence in the bank.

Last year, the Central Bank of Kenya unravelled a scheme where money stolen from the NYS was laundered using Family Bank. The bank was fined Sh1 million and some of its former top executives are facing charges in court.

Other lenders found to have been lax and did not report the suspicious transactions are Faulu Micro Finance and Sidian Bank, formerly K-Rep, which also had to part with a Sh1 million fine each.

 Increased competition

Banks are facing increased competition from technological advances that have made it easy for people to make financial transactions without involving banks.

The success of mobile money services such as M-Pesa has created an avenue for innovators to provide phone-based microloans, bypassing traditional lenders.

Some banks are now closing down branches to save costs and also migrate most of their services to the phone and the internet.