In the quarter to September 30, Development Bank of Kenya reported a liquidity ratio of negative 4.9 per cent putting it far below the legal minimum threshold of 20 per cent. This was a worse performance than that of positive 8.1 per cent at the end of June.
State-owned Development Bank of Kenya has sunk deeper into crisis as its net profit nearly halved and its liquidity ratio fell further into the negative territory.
In the quarter to September 30, the bank reported a liquidity ratio of negative 4.9 per cent putting it far below the legal minimum threshold of 20 per cent. This was a worse performance than that of positive 8.1 per cent at the end of June.
The liquidity ratio is a good indicator for a bank’s ability to meet its debt obligations as they fall due.
Development Bank’s cash crunch has been worsening over the last one year. The liquidity ratio was steadily eroded from 15.1 per cent in September 2016 to the current position.
The company’s profits after tax fell 48.1 per cent to Sh55.9 million in comparison to a similar period last year. Net interest income fell 25 per cent year-on-year as the firm took a bite from the interest rate caps.
Total operating income fell 22 per cent from the Sh475 million recorded in September 2016. The rate at which the company was cutting expenses could barely keep up with the falling income. Total operating expenses fell 10 per cent during the period to Sh289.6 million.
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Note: The results are not exact but very close to the actual.
