SBM Bank Kenya posted a Sh444.2 million profit for the year ended December, riding on cost cutting to mark an improvement from Sh1.2 billion loss the year before.
The lender cut its cost of funds by 19.5 percent to Sh6.86 billion, from Sh8.5 billion, relying less on cash from other institutions following a 20.1 percent jump in customer deposits.
SBM paid interest of Sh1.89 billion to other banking institutions in the year ended December, down from Sh3.3 billion that it had paid in the previous review period.
The bank’s interest income remained flat at Sh10.7 billion, at a time when most lenders have seen their interest income drop as lending rates fell.
The lender's loan book grew by 6.2 percent to Sh46.9 billion while its investment in government securities rose by 14.2 percent to Sh41 billion driving growth in income from Treasury bills and bonds.
“We have moved from stabilization to sustainable growth, strengthening our balance sheet while investing in innovation that improves how customers transact and manage their finances,” said Bhartesh Shah, SBM’s chief executive officer.
Management said the bank was not seeking capital injection from its shareholders despite its capital ratios growing thin following business growth.
SBM’s total capital to total risk weighted assets ratio stood at 15 percent being 0.5 percentage points above the statutory requirement.
“We try to optimize our capital because having a big buffer means you are underutilizing capital which is expensive,” said Mr Bhartesh.
“Looking forward we intend to utilize retained earnings to grow capital but if business opportunities present themselves we have the option of capital from shareholders or tier two,” he added.
The lender is carrying an accumulated loss of Sh2.95 billion in its book which ate to its core capital position that stood at Sh7.68 billion as at end of December.
Mr Bhartesh is banking on non-interest income to grow its profits and wipe out the accumulated losses.
“With a stronger balance sheet, improving asset quality and growing customer engagement, SBM Bank Kenya is well positioned to continue expanding its payments ecosystem,” said Mr Bhartesh.
SBM Holdings entered the Kenyan market in May 2017 through the acquisition of Fidelity Commercial Bank for a $1 (Sh129) consideration and renamed it SBM Bank Kenya, before making a Sh2.6 billion capital injection.
In August 2018, the bank acquired certain assets and liabilities of the then under receivership Chase Bank Kenya for Sh465,000 and added them to SBM Bank Kenya.
