High operating costs chip Family Bank gross profit to Sh1.48bn
Mid-tier lender Family Bank has announced a Sh1.48 billion profit before tax for the nine month period ended September.
This was a 46 percent decline from Sh2.7 billion the bank posted a year earlier, in what it attributes to a tough operating environment.
Family Bank Managing Director David Thuku said the bank’s high cost of operations had stifled growth while inability to grown the loan book piled pressure on its income.
“Interest expense was up by Sh2 billion to Sh3.3 billion and this is explained by the fact that when banks went under receivership the tier 2 banks had to bare high cost deposits to safeguard the deposits,” Mr Thuku said during an investor briefing.
During the period under review the bank’s operating expenses grew to Sh9 billion, a factor that has seen Family Bank announce a restructuring program.
The bank plans to lay off a sizable number of its employees while investing in alternative banking channels to lower costs.
During the period under review the bank’s loan book registered flat growth at Sh55.8 billion which it attributed to the interest cap law.
Total income rose to Sh10.5 billion during the period.
The bank has at the same time issued a profit warning, an indication that its full year profit will drop by more than 25 percent.
Family Bank Chairman Wilfred Kiboro however said the bank remains strong with a deep rooted focus for expansion.
“Family bank is solid and will continue to soldier on. From fundamentals of Family Bank nothing has changed. Family bank has re engineered itself, it has restructured itself and looking at new ways of doing business. It is in a very solid base,” Dr Kiboro said.
Family bank has opted for an expansion plan by opening three new branches in Wangige, River road and Eastleigh.
This plan will achieve the bank’s target of opening 100 branches by 2017.
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