Markets & Finance

Banks Q3 profits match last year’s full-year earnings

FAMILY

Customers queue for service at a Family Bank banking hall on Kenyatta Avenue in Nairobi. PHOTO | FILE

Banks have posted a 13 per cent rise in profit to nearly equal 2013 full-year pre-tax earnings in the nine months ended September 30.

Data from Central Bank of Kenya shows the lenders recorded profits before tax of Sh104.5 billion in the three quarters compared to Sh92.5 in a similar period last year. The full-year profit last year stood at Sh107.9 billion.

The profit growth is attributable to higher credit appetite by the public which saw the banks’ loan book close in on the Sh2 trillion mark at Sh1.9 trillion from Sh1.78 trillion three months earlier.

“The banking sector is expected to sustain its growth momentum to the end of 2014,” said Central Bank of Kenya.

Companies have been on an expansion drive following a two-year lull that was attributed to high financing costs.

“Some banks reduced their rates while others had offer periods that helped their loan growth,” said Vimal Parmar, head of research at Burbidge Capital.

READ: High appetite for loans gives banks 12.5pc profit growth in five months

The Central Bank, however, noted the banks made lower profits in the three months between September and June compared to the second quarter of June and March.

In the three months to September banks’ profit was Sh33.5 billion compared to Sh37.6 billion made between June and March, a 10.9 per cent drop.

Analysts said banks had historically performed poorly in the third quarter indicating the drop was cyclical. Banks are expected to retain most of the profit in a bid to increase capital levels in line with new regulations effective January.

“In as much as they have not paid interim dividend their capital ratios did not increase substantially which means they don’t have room to improve their dividend payouts,” said head of research at Standard Investment Bank, Francis Mwangi.

Central Bank said ratio of core capital to risk-weighted assets (loans) was 15.1 per cent in September, up from 15 per cent in June.

Customer savings with lenders stood at Sh2.25 trillion as deposit accounts rose to 26.6 million.

Non-performing loans held by the banks rose by Sh2 billion to Sh103.7 billion with personal loans being the main contributor. However, the ratio of the bad loans to total loans declined to 5.4 per cent compared to 5.7 per cent in June.

“It means the new loans issued are not slipping to non-performing,” said Mr Mwangi.

Rise in bad loans, attributed to delayed payments to contractors by government, had earlier raised concerns in the industry as banks set aside more cash as provision for the bad loans.

The Treasury has since said it used cash raised from Eurobond to pay the contractors.