Nairobi Securities Exchange stocks:
- The bank more than doubles provision for bad loans, joining KCB and others.
Barclays Bank Ltd (NSE:BBK) managed to post a 3.1% jump in 1Q2016 profits despite facing higher operating expenses compared to the same period last year. The problem of bad loans appears to be affecting many Kenyan lenders as Barclays also posted a spike in nonperforming loans for the quarter ended March 2016.
1Q2016 in numbers
Barclays Bank Ltd (NSE:BBK) posted a net profit of Sh2.18 billion in 1Q2016, an increase of 3.1% over the comparable quarter in 2015. Operating income for the quarter increased to Sh7.99 billion compared to Sh7.37 billion in the like quarter a year ago.
Barclays Bank Ltd (NSE:BBK) posted a net profit of Sh2.18 billion in 1Q2016, an increase of 3.1% over the comparable quarter in 2015. Operating income for the quarter increased to Sh7.99 billion compared to Sh7.37 billion in the like quarter a year ago.
Higher expenses offset gains
However, it turns out Barclays would have posted better results for 1Q2016 had it not been for the increase in expenses during the quarter compared to the same period last year. Operating expenses in the latest quarter surged to Sh4.95 billion from Sh4.25 billion a year ago, thus putting a squeeze on the lender’s net profit.
However, it turns out Barclays would have posted better results for 1Q2016 had it not been for the increase in expenses during the quarter compared to the same period last year. Operating expenses in the latest quarter surged to Sh4.95 billion from Sh4.25 billion a year ago, thus putting a squeeze on the lender’s net profit.
Barclays also faced higher payroll costs and rental expenses in 1Q2016. Staff costs increased to Sh2.45 billion compared Sh2.3 billion a year ago. Rental expenses also jumped to Sh323.9 million from Sh275.3 million.
Provision for sour loans doubles
Barclays Bank Ltd (NSE:BBK) more than doubled its provision for nonperforming loans during 1Q2016, which also contributed an adverse impact on its bottom-line. Bad loan provisions increased to Sh798 million, sharply up from Sh351 million in the corresponding quarter in 2015.
Banks struggling with sour credit
Barclays is not alone in the struggle with rising sour credit. Kenya Commercial Bank Ltd (NSE:KCB) also recently more than doubled its loan loss provisions, but the management later said there was no cause for alarm because the two customers accounting for 90% of the bad loans in 1Q2016 are those that serve national and country governments. As such, the lender appeared to associate the spike in nonperforming loans to timing of government budgets, which it hoped will soon ease. But Barclays is yet to explain the reason behind doubling of provision for bad loans.
Barclays is not alone in the struggle with rising sour credit. Kenya Commercial Bank Ltd (NSE:KCB) also recently more than doubled its loan loss provisions, but the management later said there was no cause for alarm because the two customers accounting for 90% of the bad loans in 1Q2016 are those that serve national and country governments. As such, the lender appeared to associate the spike in nonperforming loans to timing of government budgets, which it hoped will soon ease. But Barclays is yet to explain the reason behind doubling of provision for bad loans.
Kenyan lenders appear to be struggling with bad credit at a time when the regulator is warning that the banks are not provisioning enough for sour loans.
Shares of Barclays Bank Ltd (NSE:BBK) gained 0.50% during Monday’s session to close at Sh10.10. But only 27,700 shares of the company were changed hands compared to the daily average volume of nearly 1 million.
Nairobi Securities Exchange stocks:
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