Family Bank turns to layoffs to cut costs

Mid tier lender Family Bank plans to lay off part of its workforce as part of efforts to cut down on costs.

Permanent and pensionable employees will be given a chance to take up voluntary early retirement before the bank moves to cut numbers down further.

In a Memo to employees, the bank said the move is part of the transformation strategy focused on efficient capital deployment to boost the bank’s performance.

In 2015, the bank’s operating expenses stood at Sh6.41 billion with staff costs accounting for Sh2.6 billion of that.

Family Bank Group Managing Director David Thuku said the bank is currently remodeling its business model to take advantage of emerging opportunities in the financial services sector.

“The voluntary early retirement program is one aspect of the wider transformation program that the bank launched in June this year. The program entails assessment of our business model, with a focus on deploying capital efficiently to improve overall performance and growth of the Bank,” Mr Thuku said.

Employees have until October 14 to take up the VER offer.

Employees who take up the offer will be eligible for a month’s pay for every completed year of work, access to pension in line with the pension rules as well as having all outstanding loans settled in line with the bank’s human resource policy.

The purge at Family Bank comes at a time the industry is staring at leaner times with the enactment of interest rate caps, which are bound to eat into banks margins.

Banks largely rely on interest income to drive profitability and are expected to cut down on operational expenses.

Central Bank of Kenya Governor Dr Patrick Njoroge however thinks that he interest rate cap will lead banks to be more innovative, introducing new products and services to sustain profitability.

A CBK report released in August shows that the banking industry shed 711 jobs in 2015.

Family Bank’s half year profit dipped 39.8 percent to Sh711.5 million shillings on high operating costs.