Barclays first quarter profit jumps 10pc, helped by increase in interest income

Barclays Bank Kenya’s pre-tax profit for the first quarter rose ten per cent to Sh3.12 billion, helped by an increase in interest income.

Net interest income, or total interest minus interest expenses, rose to Sh5.14 billion from Sh4.76 billion a year before, spurred on by higher lending to customers. The unit of Barclays Plc, said its net loans and advances to customers rose to Sh125.3 billion from Sh116.78 billion. Expenditure on interest rose by more than half to Sh950 million, the bank reported yesterday, to book a slower growth than the 16.99 per cent in a similar period last year. “This was on the back of growth in interest earning assets despite the pressure of declining net interest margins,” the bank said in a statement.

It attributed the growth in profits to an eight per cent rise in net interest income, with customer deposits marching ahead of the total loans to customers. Essentially, the bank was able to attract deposits faster than it could lend in the three month period, according to the quarterly results released yesterday.

Net loans to customers rose seven per cent to Sh125 billion, helping the bank earn Sh5.1 billion in net interest income. The bank’s results could be a reflection in the financial markets following sector interventions aimed at reducing interest rate spread – the difference between cost of loans and how much the bank are paying as interest on deposits made by its customers. The State has also implored upon lenders to be more transparent in the pricing of loans.

marginal decline

That measure has led to marginal decline in the interest rates of bank loans. Other lenders in the top tier as Barclays have also booked lower earnings growth, with Equity and KCB posting slightly higher numbers.

Co-operative Bank has, however, outperformed the peers in the big league at nearly 29 per cent rise in net earnings. Barclays Bank has, for long, been Kenya’s largest lender – alongside Standard Chartered also of Britain, but the local peers have turned the tables on the two on a more aggressive product offering and higher appetite for risk in extending credit to the informal sectors.

Analysts have said that the complex decision-making process for the UK subsidiaries – which would need approvals from the parent firms back home, as the reason indigenous banks whose directors and management are based in Nairobi have reported faster earnings growth.