Family Bank’s profit rises 22.39% despite COVID-19 headwinds
Family Bank posted a 22.39 per cent rise in net profit despite the pandemic related disruptions that have hit borrowers resulting in an increase in loan repayments in the banking industry. Despite this, the Group recorded an 11.4 per cent reduction in net non-performing loans to $35.9 million. Stephen Ngugi, Chief Financial Officer, Family Bank joins CNBC Africa for more.
Thu, 22 Apr 2021 11:35:44 GMT
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AI Generated Summary
- Despite the impact of the pandemic, Family Bank reported a 22.39% rise in net profit and an 11.4% reduction in net non-performing loans.
- The bank's success was attributed to a strategic increase in the balance sheet size, growing deposits, and investments in government securities.
- Family Bank's decision to retain capital instead of paying dividends reflects a cautious approach to navigate through the uncertain economic environment and seize opportunities for sustainable growth.
Family Bank, a leading financial institution in Kenya, has defied the odds by recording a remarkable 22.39% rise in net profit despite the lingering effects of the global pandemic. Stephen Ngugi, the Chief Financial Officer of the bank, recently shared insights on the bank's impressive performance in an interview with CNBC Africa. The banking industry faced significant hurdles with the onset of the pandemic, resulting in a rise in loan repayments and disruptions in borrower behavior. However, Family Bank managed to navigate through these challenges and recorded an 11.4% reduction in net non-performing loans, amounting to $35.9 million. Ngugi highlighted the key drivers behind the bank's success in the past year, including a substantial increase in the balance sheet size, growing deposits, and strategic investments in government securities. The bank's net interest income surged by 28%, driven by continued lending to select sectors such as trade, manufacturing, and transport and logistics. Despite the economic uncertainty, Family Bank maintained strong net interest margins by managing its interest expenses effectively. The bank's prudent approach to provisioning for potential credit risks also saw a significant increase in provisions on a year-on-year basis. However, with a majority of customers resuming regular loan repayments, Ngugi expressed optimism that the bank will not witness the same level of provisioning as in the previous year. Addressing the delicate balancing act faced by banks in the region, Ngugi emphasized the bank's decision to retain capital instead of paying dividends to shareholders in light of the uncertain economic climate. By strengthening its balance sheet, Family Bank aims to seize opportunities in the market and ensure long-term sustainability amidst evolving market conditions. Furthermore, the recent redemption of a two billion Kenyan shillings bond served as a testament to the bank's commitment to its investors and signaled confidence in the bond market. The redemption also underlined the bank's successful utilization of investor funds for branch expansion, IT infrastructure investments, and digital banking initiatives. Ngugi highlighted the growing potential of the bond market, with several banks issuing successful bonds in recent months. Improved governance and disclosure requirements have bolstered investor confidence, paving the way for more activity in the bond market. Family Bank's successful bond redemption is expected to inspire further investor participation and drive growth in the market.