Barclays Group reported a 0.9% y/y growth in after tax profits to KES 1.9 billion. The performance was underpinned by a 14.0% y/y growth in non-funded income to KES 2.6 billion and a 3.1% y/y decline in operating expenses (excluding provisions) to KES 4.3 billion.
Total interest income edged up by 7.1% y/y to KES 7.4 billion driven by a 15.9% y/y growth in income from government securities to KES 1.9 billion (as the group’s holdings of government securities surged by 38.3% y/y to KES 117.0 billion) and a 3.6% y/y increase in income from loans and advances to KES 5.4 billion (on the back of a 9.0% y/y growth in the net loan book to KES 180.5 billion). The yield on loans and government securities however dropped by 41 bps and 75 bps respectively to 12.1% and 8.6% respectively (annualized).
Total interest expenses increased by 38.8% y/y to KES 2.0 billion due to a 38.2% y/y rise in customer deposits expenses to KES 1.8 billion as customer deposits increased by 15.9% y/y to KES 224.0 billion and the cost of customer deposits rose to 3.3% (1Q2018: 2.7%). Net interest income dropped by 1.3% y/y to KES 5.4 billion – given the faster growth in total interest expenses vis-a-vis total interest income. Consequently, the net interest margin (NIM) fell to 7.9% (1Q2018: 9.0%).
Non-funded income realized a 14.0% y/y growth to KES 2.6 billion owing to a 108.2% y/y surge in fees and commissions on loans and advances to KES 359.1 million. The proportion of non-funded income to total income grew to 32.2% (1Q2018: 29.2%).
Owing to a 15.2% y/y decrease in staff costs to KES 2.3 billion, operating expenses (excluding provisions) decreased by 3.1% y/y to KES 4.3 billion – leading to a cost-to-income ratio to 53.9% (1Q2018: 57.4%). Loan loss provisions rose by 10.6% y/y to KES 636.7 million as the banking group’s gross non-performing loans grew by 22.1% y/y to KES 15.4 billion. Asset quality deteriorated slightly as the NPL ratio (gross NPL/net loan book) increased by 91 bps to 8.5%.
We note with concern over the decline in net interest income.