Family Bank has recorded 85 per cent jump in net profit for the three months to March as removal of the rate cap in November 2019 unlocked interest income.
The lender’s net profit grew to Sh297.8 million, up from Sh160.8 million in a similar period last year. Over the period, the bank’s lending increased from Sh45.6 billion to Sh53 billion.
“The increase in loans and advances to customers positively impacted the bank’s bottom-line, with an increase in interest income from loans and advances hitting Sh1.7 billion during the first quarter of 2020, up from the Sh1.4 billion that the bank made during the same [sic] period in 2019,” said Family Bank CEO Rebecca Mbithi.
The bank’s net interest income expanded 24.8 per cent to Sh1.4 billion from Sh1.13 billion recorded last year. This growth was supported by the increase in loans and advances that grew by 16 per cent.
Non-interest income, including increased investment in government securities at Sh9.4 billion from Sh7.2 billion in 2019 helped it earn Sh309.5 million from government securities, up 68.5 per cent against Sh183.6 million it made during the first three months of 2019.
Total operating expenses marginally rose by Sh149.52 million to Sh1.71 billion, highlighting the cost containment measures being implemented by the bank.
Family Bank registered the growth at a time the rate cap law had been repealed, growing customer deposits by 18 per cent to Sh61 billion while focusing on automation and digitisation that has seen the lender move 80 per cent of transactions online.
Ms Mbithi said the bank will weather the coronavirus storm by focusing on cost containment by encouraging the use of alternative banking solutions to meet customer needs during this period.
“With the Covid-19 pandemic, we are hopeful that measures put in place by the Central Bank of Kenya to facilitate lending and enhancing liquidity will strengthen the financial sector and in turn promote trade,” said Ms Mbithi.
Like other banks, the lender is facing a tough second quarter that has been hit by loan defaults and restructuring of up to Sh273.1 billion — so far — by the industry.
Loan demand has also declined as customers suspend capital expenditure in favour of holding on to cash to survive the pandemic.
The CBK has come up with measures to prop up banks during the Covid-19 pandemic by allowing lenders to offer relief to distressed borrowers including cutting lending rates and lowering the ratio of cash that commercial banks can hold.