DTB net earnings jump 10.8pc as it moves to tame bad loans

What you need to know:

DTB saved Sh1.1 billion on lower provisioning after it managed to turn around and start cutting down bad loans.

Diamond Trust Bank (DTB) #ticker:DTK has posted a 10.8 percent jump in net profit for the six months to June, 2019, to hit Sh4.1 billion from Sh3.7 billion last year.

This is mostly by tightening recovery of bad loans to offset provisioning.

The lender saved Sh1.1 billion on lower provisioning after it managed to turn around and start cutting down bad loans which stood at Sh15.1 billion in June from Sh15.2 billion.

DTB has proposed not to pay interim dividends as earnings from loans declined from Sh11 billon to Sh9.9 billion after it cut back lending to Sh190.7 billion from Sh198.2 billion in the first half of last year.

“In line with the practice adopted in recent years, the directors do not propose the payment of an interim dividend,” the lender said. The group managed to balance its growth in deposits with costs from interest expense which reduced from Sh6.7 billion last year to Sh6 billion even as customer deposit rose from Sh281 billion to Sh283 billion.

As the bank cut lending following industry trend after the rate cap, focus has shifted in making money away from interest income where DTB made Sh2.9 billion up from Sh2.7 billion last year supported from foreign exchange trading income.

The lender has also been managing its balance sheet by cutting on long-term borrowed funds from Sh16.9 billion in June last year to Sh13.2 billion in the first half of 2019.

DTB says it holds long-term notes that bear interest at rates referenced to the six months Libor including debt facilities of Sh2.8 billion ($28 million) raised from the International Finance Corporation (IFC) and Sh2.5 billion ($25 million) raised from the African Development Bank (AfDB).

It also holds loan facilities of Sh1.66 billion ($16.6 million), Sh2.28 billion ($22.8 million), Sh500 million ($5 million) and Sh1 billion ($10 million) raised from Proparco, Deutsche Investitions- und Entwicklungsgesellschaft (DEG), Agence Française de Development (AFD) and African Development Bank respectively.