Commercial Bank of Africa (CBA) has beaten the interest rate cap after its revenue from transactions surpassed earnings from loans.
This saw the lender buck a mix of static and lower earnings among large banks to post a 14.1 per cent net profit growth in the half year ended June, helped by higher fees and commissions.
The private lender, which is ranked seventh after publicly traded Diamond Trust Bank #ticker:DTK, reported a net profit of Sh2.7 billion in the period compared to Sh2.3 billion a year earlier.
All its peers reported lower earnings save for KCB #ticker:KCB whose net profit was flat at Sh10.2 billion.
CBA’s performance was lifted by increased non-interest income, including forex trading and fees on mobile-based M-Shwari loans.
Revenue from these transactions rose 16.3 per cent to Sh5.5 billion, more than compensating for a 7.7 per cent decline in net interest income to Sh4.4 billion.
The fact that CBA’s non-interest income has surpassed its interest earnings puts the lender in a position to shake off the effects of the interest rate caps.
Other banks are also keen on growing their transaction-based income, having relied heavily on the lending business whose margins have narrowed in the wake of the rate caps.
CBA’s fees and commissions on loans, in particular, increased by a fifth to Sh3.1 billion, aided by a 6.9 per cent loan book expansion to Sh114.3 billion.
The lender also benefited from a 2.8 drop in operating expenses to Sh6 billion, partly due to a 42 per cent fall in loan loss provision to Sh1.2 billion.
The bank provided less for its stock of bad debt despite this rising 3.5 per cent to Sh12 billion.
Unlock a world of exclusive content today!Unlock a world of exclusive content today!
