Family Bank profit jumps 13pc on higher interest income

Family Bank

Family Bank towers on Muindi Mbingu Street and Moktar Daddar Street, Nairobi County on March 22, 2023. 

Photo credit: File | Nation Media Group

Family Bank posted a 13.3 percent jump in net profit to Sh2.5 billion in the year ended December, helped by higher income from lending and transactions.

The lender’s net income rose from Sh2.2 billion a year earlier. The performance saw the company recommend the payment of a first and final dividend of Sh0.56 per share.

“The group directors have proposed a 30 percent dividend payout which translates to Sh0.56 per share. The bank’s total capital and liquidity ratios remained strong, adequately above the regulatory requirement,” the bank said in a statement.

Family Bank’s net interest income rose 9.2 percent to Sh9.3 billion as the loan book expanded to Sh86.9 billion from Sh81.3 billion. Interest expenses surged 40.8 percent to Sh6.3 billion, reflecting the rising interest rate environment.

Banks have seen their cost of funds rise in line with the increase in interest rates, with the average deposit rate standing at 10.18 percent in January 2024 from a low of 7.47 percent in the same month last year.

Family Bank said it would have recorded a faster growth in interest income if it had re-priced its loans to reflect the full impact of the escalation of the cost of funds.

“The slower growth in the interest income was because the group chose not to pass the full cost of funding to the customers thereby cushioning them from the steep rise from interest rates which was witnessed in the year 2023,” the lender said.

Non-interest income increased to Sh3.9 billion from Sh3.3 billion, contributing to the growth of the bottom line.

Operating expenses jumped to Sh10.1 billion from Sh8.2 billion, driven by higher loan loss provision, staff costs and other items. The increase in loan loss provisions came as the non-performing loans increased to Sh14 billion from Sh12.4 billion.

“Operating expenses growth was kept at a minimum … which was mainly driven by the high inflation, continued investments in people and technology and the Kenya shilling depreciation which saw a steep increase in the dollar-denominated technology-related expenses,” Family Bank said.

The bank said the near-tripling of provisions was due to both additional lending and downgrades on customer loans in 2023 in line with the firm’s credit risk management practices.

The bank increased its purchase of government securities held to maturity, benefitting from rising interest rates on the fixed-income assets.