CfC net profit jumps 59pc on Treasury securities income

Increased earnings from lending to the government as well as foreign exchange commissions helped CfC Stanbic Bank to offset a flat growth in loan book income and report a 59 per cent increase in net profit for the first three months of the year.

CfC’s net profit jumped to Sh1.6 billion in the first quarter compared to Sh1 billion in the first three months of last year. The performance was largely driven by interest income on Treasury securities, transaction fees and forex trading.

The core interest income from loans stagnated at Sh1.9 billion, while interest on government bonds nearly doubled to Sh655.1 million and non-interest earnings (which mainly includes transaction fees) increased 42.8 per cent to Sh3 billion.

CfC’s stock of Treasury securities increased by Sh4.4 billion over the previous 12 months to stand at Sh19.2 billion in March, generating the extra income.

The bank expanded its loan book by about Sh6 billion to Sh75 billion, indicating that the drop in interest earnings could be due to a shrinking of profit margins.

The lender also booked a sharp rise in non-performing loans that stood at Sh1.9 billion in March from Sh1.4 billion in the same month last year.

Its ‘other income’ category jumped 55.1 per cent to Sh1 billion from Sh667 million. Its forex earnings also increased 34.1 per cent to Sh1.1 billion from Sh868.4 million.

This came as the value of forex hedges — structured to protect traders from volatility in the currency markets — increased from Sh22.5 billion in March 2013 to Sh51.4 billion (December 2013) and Sh62.9 billion (March 2014).

Fees and commissions on loans and letters of credit increased 41.5 per cent to Sh833.8 million.