Barclays Kenya turns to UK parent firm for Sh4bn loan

(From left) Barclays Bank of Kenya chairman Francis Okello, managing director Jeremy Awori and chief finance officer Yusuf Omari during an investor briefing and the release of the bank’s half year results at a Nairobi hotel in Nairobi on August 12, 2014. PHOTO | SALATON NJAU  NATION MEDIA GROUP

In Summary

• The subsidiary of the London-listed multinational said it settled on this option because it was faster and cheaper.
• Barclays reported a 14 per cent after-tax profit growth for the first half of 2014 to post Sh4.2 billion up from Sh3.7 billion last year.

By RAMENYA GIBENDI
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Barclays Bank will tap its parent company for a Sh4 billion loan as the lender seeks to boost its capital base in line with Central Bank regulations.

The money will also be used to fund big projects.

The subsidiary of the London-listed multinational said it settled on this option because it was faster and cheaper.

“Borrowing from the local market is lengthy and tied to the T-bill rate while group funding will be tied to the Libor (London Inter-Bank Offer Rate) that is more stable,” chief financial officer Yusuf Omari said at an investor briefing in Nairobi on Tuesday.

Central Bank regulations require all lenders to maintain total capital to risk weighted assets of at least 14.5 per cent as a cushion to financial shocks in the market. Currently, Barclays’ total capital to risk weighted assets ratio stands at 15.7 per cent just 1.2 percentage points above Central Bank’s limit.

“Whereas the total capital ratio is sufficient to support business growth in the medium term, we will raise Tier II capital to ensure we have the right balance between Tier I and Tier II,” Barclays Bank of Kenya managing director Jeremy Awori said.

SUPPLEMENTARY CAPITAL

Tier II capital is a bank’s supplementary capital that includes revaluation reserves, undisclosed reserves, and debt. Tier I is a bank’s core capital.

The bank will also not be paying interim dividend, for the first time in seven years, with the money going to boost its capital. This is expected to give it more headroom to lend more.

Barclays reported a 14 per cent after-tax profit growth for the first half of 2014 to post Sh4.2 billion up from Sh3.7 billion last year, riding on increased lending.

Its loan book grew by 20 per cent to Sh128 billion, up from Sh107 billion in 2013, pushing net interest income to Sh9.7 billion.

Customer deposits went up by seven per cent to Sh148 billion from Sh139 billion held over a similar period in 2013. Total assets grew to Sh213 billion from Sh186 billion last year, representing a 15 per cent growth.

Going forward, the Barclays will be looking to finance government projects as it seeks a top three slot among banks in Kenya ranked by revenues.

“To achieve this, we are refocusing our efforts on key transformational projects such as the recently concluded Eurobond in order to sustain a good performance,” Mr Awori said