Family Bank posts 75pc earnings rise on interest income

Family Bank reported a 75.2 per cent net profit growth in the half year ended June on the back of higher interest income.

The lender’s net earnings in the period stood at Sh638.4 million compared to Sh364.3 million a year earlier.

The performance is one of the best in the industry where more players are posting lower profits on increased provisions for coronavirus-related defaults.

KCB Group’s #ticker:KCB net profit, for instance, fell 40.4 per cent to Sh7.5 billion while that of Equity Group #ticker:EQTY receded 24.9 per cent to Sh9 billion over the same period.

Family Bank’s interest income surged 25.7 per cent to Sh4.1 billion, helped by increased lending and investment in government debt securities.

Its loan book expanded 17.4 per cent to Sh54.8 billion while its holdings of government bonds and T-bills increased 14.6 per cent to Sh10.4 billion.

The bank’s stock of non-performing loans rose 11.7 per cent to Sh9.1 billion, resulting in provision for the bad debt jumping 32.2 per cent to Sh451.3 million.

Lenders such as Equity and KCB have raised their provisions multiple times of the levels seen in the previous period, hurting their earnings in the half year ended June.

That of Equity, for instance, rose 8.7 times to Sh8 billion in response to defaults jumping 1.5 times to Sh45.5 billion.

Outbreak of the Covid-19 pandemic and public health measures taken to contain it has hurt business and household incomes, causing many borrowers to default or renegotiate their loan terms.

Kenyan banks had restructured aggregate loans of Sh844.4 billion or 29 per cent of the industry’s Sh2.9 trillion loan book as of June, according to the Central Bank of Kenya.

Family Bank’s interest expenses increased 19.6 per cent to Sh1.2 billion, partly reflecting the impact of customer deposits rising 23.5 per cent to Sh66.6 billion.

The lender’s non-interest income including fees and commissions declined 1.4 per cent to Sh1.2 billion.

The ongoing reopening of the economy, including resumption of international travel and reduction of night-time curfew hours, is expected to lift business activities and brighten the outlook for bank earnings.

The tourism, entertainment, travel and education sectors have suffered the biggest disruption from the public health measures.