Sidian Bank has slipped into the red in the six months to June weighed down by lower interest income as the rate cap regime narrowed the lender’s earnings from loans.
The Centum-backed tier III bank, formerly known as K-Rep, posted a loss of Sh122.7 million as at June 2017 compared to a net profit of Sh158.2 million made in a similar period a year earlier.
Net interest earnings plunged 40.7 per cent or Sh411 million to Sh0.59 billion from Sh1.01 billion in June 2016 — highlighting the impact of the rate caps which were not in place in the first half of last year.
Sidian Bank’s loan book contracted to Sh960 million in the period under review to close at Sh12.38 billion compared to Sh13.34 billion last June, according to the lender’s financials published Monday.
Non-interest income from fees and commissions dropped 5.7 per cent to Sh293 million in the period under review. Outgoing chief executive Titus Karanja declined to comment on the performance, saying he was out of town. He referred our queries to incoming boss Chege Thumbi.
“I only reported on the 1st of this month. Let’s discuss once I settle down,” Mr Thumbi told the Business Daily. Centum controls 74 per cent of Sidian Bank.
Sidian in October last year projected a 40 per cent drop in net earnings following the enactment of a law capping interest rates at four percentage points above the signal rate, which cut the wide spreads previously enjoyed by lenders.
The bank laid off 108 out of its total 560 staff at a cost of Sh70 million as a strategy to contain costs under the rate caps regime.
Despite the job cuts, Sidian’s wage bill increased 10 per cent to 374 million in the half-year period.
Customer deposits dropped to Sh12 billion compared to Sh13.6 billion in June last year.
The bank’s provisions for bad loans increased by a fifth to Sh181.6 million from Sh151.7 million in June 2016.
Sidian’s gross volume of toxic loans stood at Sh2.7 billion in June 2017, equivalent to 22 per cent of its loan book.
The bank’s investment in government securities dropped to Sh1.8 billion from Sh2.5 billion in the first half of 2016.