Godwin Emefiele’s term as governor of the Central Bank of Nigeria (CBN) officially ends on 2 June. His dual exchange rate structure, which the IMF has long urged Nigeria to scrap, may not last much longer.
Barclays Kenya profits suggest wider gains in banking sector
Barclays Bank of Kenya posted a rise in after-tax profits in 2018 on the strength of non-funded income.
The local subsidiary of Absa Group Limited told investors last week that it earned KSh7.416bn in 2018, a steady rise from KSh6.926bn posted in 2017.
- The bank’s non-funded income rose by 14.7%, while customer deposits increased to KSh207.4bn in what CEO/managing director Jeremy Awori called “the fastest growth in a decade on some key performance metrics”.
The lender’s total assets also grew to KSh325bn from KSh271.77bn, while its loan book grew by 5% to close the year at KSh177.35bn.
- The bank also declared a final dividend of 90 cents per share.
Traditional profit avenues vanish
In what has clearly been a tougher credit market for Kenyan lenders, Barclays’ net interest income rose by a paltry 0.8% in 2018.
The lender’s response to the rate cap included launching Timiza, a mobile lending app, and hiring a chief data officer.
- The bank processed 1.6 million loans worth KSh10bn through the mobile app in 2018, which also grew its customer base by three million.
Barclays, which has been in Kenya for more than a century, is currently the fourth largest bank in Kenya by asset base. It is in the process of rebranding to Absa Group Limited, a process that is also impacting its profits due to the one-off costs of rebranding.
Banking sector rebounding
Two other lenders, KCB Group and Stanbic Holdings, also recently announced growth in net profits.
- KCB posed a 21.8% increase in profit.
- Stanbic posted a 45.5% increase in profits to KSh6.27bn.
Other lenders are expected to follow suit in the next week as they race to meet the 31 March deadline to post their full-year results.
The growth in profit matches the latest figures from the Kenya Central Bank which show the banking sector earned KSh152.3bn last year in pre-tax profits, a 12.3% increase on 2017 figures.
- In its 2018 annual report, the central bank recorded a 2.6% growth in loans and advances, compared to jumps as high as 20% in some pre-cap years. The report noted the highest growth (44.8%) in investments as banks seek new revenue streams.
In the meantime, the base lending rate remains at 9%, where it has been since July 2018.
- At the Barclays investor briefing, Awori warned that the interest rate cap would continue to reduce margins from loans, just days before a court found the rate cap unconstitutional. However, the three-judge bench suspended implementation of the ruling for 12 months to give the legislature time to amend the law.
The Monetary Policy Committee is due to meet at the end of this month to review the base lending rate, which could drive interest rates lower.
Despite this, a January 2019 market survey by the central bank showed that most Kenyan executives expect an easier 2019, with lower inflation, an increase in private-sector credit, and a stable shilling.