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Net Advances For Consolidated Bank Grow By 4 Percent

BY Juma · August 31, 2016 02:08 pm

Consolidated Bank released its first half 2016 financial results on 29th August 2016, recording growth in net advances of 4 per cent to Kshs 9.11 billion in June 2016 compared with Kshs 8.80 billion as at 30 June 2015.

The non-funded income increased by 99 per cent to Kshs 389 million from Kshs 196 million the same period last year due to increase in write backs from recovery of nonperforming loans to Kshs 125 million from Kshs 16 million the same period last year.

Customer deposits declined by 4 per cent during the period due to tight liquidity in the market that resulted in increased interest payments. This led the bank to record a pre-tax loss of Kshs 63 million in the period ending 30 June 2016.

Interest income increased by 4 per cent, although interest expense increased by 23 per cent due to the high cost of deposits.  This reflects the difficult operating environment for the banking sector over the last six months.

 The Bank also managed to reduce its overall bad debt by 44 per cent in 12 months, attributed to the aggressive debt recovery efforts.

Net Impairment provisions for bad loans increased to Kshs 137 million from a write back of Kshs 37 million against a backdrop of an aggressive provisioning model adopted by the Bank to ensure compliance with the Central Bank of Kenya’s Prudential Guidelines.

Read: Listed Banks Bounce Back at the NSE

Moving forward, although the Rights Issue was not successful, Consolidated Bank expects the ongoing conversations with the National Treasury on recapitalization to bear positive results. This is in addition to the restructuring undertaken by Management to reduce bad loans and generate internal efficiencies.

This process, and the recapitalization, will enable the Bank to comfortably adhere to the CBK’s Prudential Guidelines and fund its operations.

With regards to the licensing of the Bank, we have the full support of the National Treasury on the recapitalization efforts and we expect this matter to be resolved once the ongoing discussions are concluded in due course. The National Treasury which commands 77.9% shareholding is keen to support the Bank on its quest to recapitalize its business in order to meet the prescribed prudential ratios.

The Bank fully supports efforts to reduce the cost of credit as stipulated in the Banking (Amendment) Bill 2015 that seeks to control interest rates on loans and deposits. We confirm that Consolidated Bank of Kenya will fully comply with the new law.

Consolidated Bank remains stable and committed to meet its regulatory obligations as well as delivering best-in-class service to its valued customers.

 

Juma is an enthusiastic journalist who believes that journalism has power to change the world either negatively or positively depending on how one uses it. (020) 528 0222 or Email: info@sokodirectory.com

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