Barclays goes digital as net profit slumps 12pc

Jeremy Awori, Barclays Kenya managing director. file photo | nmg 

By KEVIN MWANZA

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Summary

• Barclays Kenya saw its revenue slump after a rate cap law cut its interest income by a four per cent, pushing total revenue by eight per cent to Sh22.6 billion.
• The year-old interest rate caps coupled with a drought and prolonged electioneering has hurt banks’ business this year, with most of them reporting lower or marginal growth in profitability.

Barclays Kenya is looking to innovation and digitisation to cut costs and increase revenue after its net profit declined by 12 per cent to Sh5.3 billion in the first nine months of the year.

The bank saw its revenue slump after a rate cap law cut its interest income by a four per cent, pushing total revenue by eight per cent to Sh22.6 billion.

The year-old interest rate caps coupled with a drought and prolonged electioneering has hurt banks’ business this year, with most of them reporting lower or marginal growth in profitability.

“We continue to manage our costs with a number of running initiatives to create efficiencies. Top of these initiatives include automation of our processing centres, investment in alternative channels and branch rationalisation programmes,” said Jeremy Awori, the bank’s managing director in a statement.

“Our innovation and digitisation agenda is in top gear and is aimed at moving the bulk of transactions to channels such as mobile banking, Internet banking and agency banking. Non branch transactions stood at 64 per cent up from 45 per cent as at close of 2016,” he added.

READ: Barclays' Q3 net profit drops to Sh5.3 bn on lower revenues

Mr Awori said the prolonged electoral period had created a “climate of uncertainty” at a time when the rate caps had squeezed lenders’ margins from loans.

“We are however optimistic that both of these situations will be resolved soon,” Mr Awori said.

“We now have to develop innovative solutions faster than before in order to address our clients’ needs and therefore remain relevant.”

In the nine months through September, Barclays posted a five-per cent growth in customer loans to Sh167 billion, mainly driven by growth in the consumer and SME banking businesses.

READ: Bankers see less loan earnings from 2018

Customer deposits grew by 11 per cent to Sh200 billion mainly driven by transactional accounts following the launch of new products such as the Twin Account.

The transactional accounts balances accounted for 71 per cent of the deposits up from 61 per cent in the previous period, resulting in the average cost of funds dropping to 2.4 per cent.