A sharp rise in bad debt and one-off restructuring costs saw the bank's after tax profit decline 12.6 per cent to Sh7.6 billion in 2013 from Sh8.7 billion reported the previous year. The bank, however, grew its net interest income by four per cent to Sh18.9 billion against Sh18.1 billion in 2012.
Bad debts increased by 747 per cent to Sh1.2 billion from Sh144 million in 2012 while lay offs hit the bottom line by Sh788 million.
"For the industry, we have a situation where the growth of non-performing loans is twice the level of overall loan growth… This becomes a key area of focus for us to ensure we continue our prudent risk management guidelines,"
Central Bank of
This was compounded by the government's delay in settling fees owed to contractors for completed projects greatly affecting repayment patterns of customers in the building and construction sector.
"Credit risk is the single largest factor affecting the soundness of financial institutions and the financial system as a whole, and lending is the principal business for most banks," the CBK said.
"The sharp rise in impairment charge is attributed to non-recurring impairment of Sh1 billion, recorded as at the end of 2012. Excluding the one-off recoveries, the impairment charge would be in line with the balance sheet growth," said
The chief executive noted that the fruits of consolidation and investment in 2013 are set to be seen in 2014 in terms of increased earnings.
"Typically, in the past, we have lagged the industry average on income growth. Now we are actually growing at a slightly faster pace than the industry growth. Secondly, we want to grow our balance sheet at a faster pace than in the past by keeping tabs on strong risk management principles," said
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