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Bank of Africa profit up 74pc on cost cutting

Wednesday August 15 2018
boa

BOA managing director Ronald Marambii (centre). The lender has posted a 74 per cent growth in after-tax profit to hit $547,000 for the six months ended June 2018. FILE PHOTO | NMG

By BUSINESS DAILY

Bank of Africa, which shut down 12 branches and laid off staff last year, has posted a 74 per cent growth in after-tax profit to hit Ksh55.2 million ($547,000) for the six months ended June 2018.

Despite interest income dropping by 14 per cent to Ksh1.87 billion ($18.5 million) compared to Ksh2.18 billon ($21.6 million) in a similar period last year, the lender cut its operating expenses by 22 per cent, helping it grow its bottom-line.

The fall in interest income was as a result of revenue from loans and advances to customers dropping by Ksh287 million ($2.8 million) to Ksh1.56 billion ($15.5 million) as the bank slammed breaks on its loan book.

Loans and advances to customers dropped from Ksh29.8 billion ($295.8 million) to Ksh23.5 billion ($233.2 million), translating to a Ksh6.3 billion ($62.5 million) or 21 per cent drop in loan book growth.

The bank cut its loan loss provision by nearly half to Ksh349 million ($3.5 million) as staff costs and rental charges declined by Ksh13 million ($129,000) and Ksh27 million ($268,065) respectively to reflect gains of branch closures and trimming of employee numbers.

The lender, headed by Ronald Murambi, is now left with 30 branches — 17 in Nairobi and the rest spread out in other parts of the country.

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During the period total interest expenses dropped by 27 per cent to Ksh1.1 billion ($11 million) supported by reduced interest expense on customer deposits.

The drop in interest paid out for holding customer money was despite the bank receiving Ksh72 million ($714,800) additional deposits during the period, pointing to them being demand deposits and therefore interest-free.

Banking laws compel lenders to pay interest at 70 per cent of the central bank rate (CBR) for all fixed deposits.

Bank of Africa’s performance mirrors the rebounding performance of banks since the first quarter despite their calls to scrap the interest rate cap law to allow them free hand in pricing credit.

Stanbic Bank of Kenya announced a more than doubling of its half-year profits to Ksh3.4 billion ($33.8 million) while that of Barclays Bank of Kenya grew by 6.2 per cent to Ksh3.76 billion ($37.3 million).

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