Barclays second big bank to give gloomy forecast

Barclays Bank of Kenya #ticker:BBK has become the second lender to predict a drop in earnings this year, attributing the gloomy outlook to the interest rates cap law which has narrowed the lenders’ profit margins.

The bank has projected a drop in full-year revenue in the range of 15 to 25 per cent.

This year marks the first full 12 months under the law that caps interest rates at four percentage points above the Central Bank of Kenya signal rate.

“To mitigate we need to adapt our business models. We don’t know what the future holds with regard to this law,” Barclays Kenya managing director Jeremy Awori told shareholders at the bank’s Friday annual general meeting.

KCB Group #ticker:KCB, Kenya’s largest lender by assets, last week said it anticipates net interest margin will drop by one per cent this year, with return on equity tanking by up to four per cent impacted by the law capping rates, which narrowed banks’ interest rates spread.

Barclays’ revenue grew nine per cent to hit Sh37.47 billion in the period to December 2016. After-tax profit dropped 12 per cent to Sh7.3 billion.
KCB reported an after-tax profit of Sh19.72 billion in 2016.

Barclays chief financial officer Yusuf Omari told shareholders at the AGM that the lender was turning to new revenue streams to compensate for the expected drop in earnings. 

“The key challenge is how to balance and diversify into other streams such as bancassurance and stockbroking,” he said at the meeting held at the Barclays Bank Sports Club in Ruaraka.

The bank, controlled 68.5 per cent by Johannesburg Stock Exchange-listed Barclays Africa, saw its staff count drop by 171 workers last year.