Third Quarter Profits for Commercial Banks Reduced

By / Published November 11, 2015 | 8:41 am



African Banking

Profits in the third quarter by the commercial banks fell by 5.8 percent compared to the previous quarter as a result of what has been termed as difficult operating conditions in the previous few months. The Central Bank of Kenya has released data that indicate that lenders recorded 37.31 billion shillings in pretax profits in the September quarter. This was however down from 39.61 billion shillings that was realized in the June quarter.

According to economic analysts, the tight liquidity conditions as well as the higher non-performing loans that prevailed in the third quarter greatly contributed to the lower profits that were registered by the banking industry. The data further indicate that the third quarter had lower profits than the second quarter of the year.

This third quarter, the interbank rates rose and at the same time deposits too rose. This reduced the spread and the profit margins that come with the spread. The pretax profit were however higher by 3.8 billion shillings or 11.3 percent compared to the same quarter last year.

Central Bank of Kenya said that the liquidity of the market was slightly down at 37.4 percent than they were in the quarter that ended in the month of June when the liquidity was at 38.7 percent. In this third quarter too, average liquid assets were at 946.63 billion shillings with the average liabilities being worth 2,531.9 billion shillings and this is what has brought about the average liquidity ratio of 37.4 percent.

According to the report and data, the main source of the profit for the banking industry was the interest on advances as well as on government securities respectively that accounted for 60.7 percent and 16.1 percent of the total income. This brought the total income of 121.52 billion shillings in the third quarter. This was down from 116.29 billion shillings in the second quarter of this year 2015.

According to the Central Bank of Kenya, the total expenses increased by 9.8 percent from 76.68 billion shillings in the quarter that ended the month of June to 84.21 billion shillings in the third quarter that ended the month of September.

The gross non-performing loans (NPLs) value increased by 0.7 percent from 123.9 billion shillings in the month of June 2015 to 124.8 billion shillings in the month of September 2015. During this third quarter period that is under review, almost all the economic sectors witnessed an increase in the non-performing loans with only a few for sectors like the tourism sector realizing a reduction.

The financial sector and the energy sector as well as the water sector experienced an increase in the non-performing loans by 11.5 percent and 11.6 percent respectively with the tourism sector registering a high decrease of 14.0 percent.

 

 






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