Family Bank posts Sh743m after-tax loss in third quarter

Family Bank slipped into the red in the nine months to September, weighed down by lower interest income and reduced lending in the wake of introduction of the rate cap regime.

The mid-sized lender Wednesday posted a loss of Sh743 million compared to a net profit of Sh963 million during a similar period last year.

Net interest earnings went down by 46 per cent to Sh2.94 billion in 2017 in the nine months through September from Sh5.47 billion last year.

Family Bank’s total interest income contracted by 43 per cent to Sh4.98 billion from Sh8.78 billion, underlining the extent to which the new regime putting a ceiling on lending rates had pushed its earnings.

READ: Family, Sidian join lenders in the loss-making territory

Last year, Parliament passed a law restricting the lending rate to four percentage points above the prevailing base rate, also called Central Bank Rate.

Reduced lending

The decline in the net interest income was also a result of the reduced lending growth and the effort undertaken by the bank to strengthen its liquidity.

During the period under review, staff costs decreased to Sh1.6 billion in the nine months to September in 2017 compared to Sh2 billion in 2016.

READ: Banks’ payroll burden touches seven-year high

While the growth in interest income from government securities was flat at just above Sh500 million compared to the same period last year, there was a 45 per cent decline in income from loans and advances to organisations and individuals.

Total non-interest income stood at a flat Sh1.9 billion, standing at the same level as at the same period last year.

Total operating income was down 34 per cent to Sh4.8 billion from Sh7.3 billion.

During the nine months, the bank’s total operating expenses declined by about six per cent to Sh5.5 billion compared to Sh5.9 billion at the same time last year.