I&M Group’s net profit remained flat at Sh2.5 billion in the first quarter ended March as increased provisions for bad debt and higher interest expenses cancelled growth in income from lending and transactions.
The lender’s loan loss provision more than tripled to Sh1.6 billion from Sh480.7 million as the stock of non-performing loans jumped 24 percent to Sh29.3 billion.
The NSE-listed firm said the review period was marked by tough operating terms.
“This first quarter posed its own challenges amidst rising inflation and the high cost of doing business,” Sarit Raja Shah, the executive director at I&M Group said in a statement.
“We look forward to a continued positive trajectory in the coming quarters.”
The higher provisions for bad loans contributed to total operating expenses surging 56.6 percent to Sh6 billion.
I&M also incurred higher interest expenses of Sh4 billion, representing a 20.1 percent increase from Sh3.3 billion.
The higher cost of funds came despite customer deposits growing at a relatively slower rate of 4.9 percent to Sh324.6 billion.
The bank’s total interest income expanded 18.2 percent to Sh10.1 billion as the loan book grew 17.9 percent to Sh257.7 billion.
Investment in government debt securities meanwhile shrunk by Sh11.1 billion or 13.3 percent to Sh72.7 billion.
Lenders have been scaling down their holdings of government bonds and T-bills in a shift to increased lending to the private sector.
The strategy is aimed at raising their interest income besides reducing the risk of paper losses that face holders of fixed-income securities in a rising interest rates environment.
I&M recorded a 58.7 percent increase in non-interest income to Sh3.4 billion, helped by fees on foreign exchange trades which more than doubled to Sh1.4 billion.
Banks have benefitted from the volatility in the forex markets, with the weakening of the shilling prompting businesses and individuals to initiate more transactions as they stock up on hard currencies.