Bank of Africa, which shut down 12 branches and laid off staff last year, has posted a 74 per cent growth in after-tax profit to hit Sh55.2 million for the six months ended June 2018.
Despite interest income dropping by 14 per cent to Sh1.87 billion compared to Sh2.18 billon in a similar period last year, the lender cut its operating expenses by 22 per cent, helping it grow its bottom-line.
The fall in interest income was as a result of revenue from loans and advances to customers dropping by Sh287 million to Sh1.56 billion as the bank slammed breaks on its loan book.
Loans and advances to customers dropped from Sh29.8 billion to Sh23.5 billion, translating to a Sh6.3 billion or 21 per cent drop in loan book growth.
The bank cut its loan loss provision by nearly half to Sh349 million as staff costs and rental charges declined by Sh13 million and Sh27 million respectively to reflect gains of branch closures and trimming of employee numbers.
The lender, headed by Ronald Murambi, is now left with 30 branches — 17 in Nairobi and the rest spread out in other parts of the country.
During the period total interest expenses dropped by 27 per cent to Sh1.1 billion supported by reduced interest expense on customer deposits. The drop in interest paid out for holding customer money was despite the bank receiving Sh72 million additional deposits during the period, pointing to them being demand deposits and therefore interest-free.
Banking laws compel lenders to pay interest at 70 per cent of the central bank rate (CBR) for all fixed deposits.
Bank of Africa’s performance mirrors the rebounding performance of banks since the first quarter despite their calls to scrap the interest rate cap law to allow them free hand in pricing credit.
Stanbic Bank of Kenya announced a more than doubling of its half-year profits to Sh3.4 billion while that of Barclays Bank of Kenya grew by 6.2 per cent to Sh3.76 billion.