Barclays Bank profits increases despite efforts to cap interest rates

By Ben Kinyanjui

Despite threats posed by spirited efforts by Mps to cap interest rates on loans, Barclays Bank has posted an 11 percent rise in profit to Sh12 billion for the year ending in December 2011.

“The income number has grown by just over one percent (Sh26.3 billion), this is despite our balance sheet growth from Sh87 billion to Sh99 billion which happened in the second half of the year and the benefit of that revenue growth is likely to come in 2012,” says Managing Director Adan Mohammed.

However, Mr Mohammed expressed concern that the move by parliament would be counterproductive as it would reduce overall lending that would eventually affect economic growth.

Economic experts including the world Bank country director Johannes Zutt have dismissed the move as self defeating as it would affect the overall performance of the banking industry.

Kenya has one of the most robust financial sectors in the East African region with several local banks including the Kenya Commercial Bank and Equity operating across the region including in South Sudan.

However, interest rates have remained relatively high due to limited competition among the players, a move that has precipitated parliament’s move to cap interest rates as a way to ensure the rates remained stable.

Mohamed also said the bank remains cautiously optimistic this year as it is an election year when political activity is likely to affect economic activity. It is also a year when more money is injected into circulation to fund the electioneering process.

“We have got to continue with our agenda of controlled growth. The priority for us is to continue to build on our customer assets and it’s got to be done by balancing risk and reward to make sure that we do not land ourselves in trouble,” he says.

The CEO said the current high interest rates are just the reflection of the use of the Central Bank Rate as a tool for containing inflation but once this was stemmed, the lending rates would begin to come down to levels that have been witnessed in the last five years.

The bank has recommended a dividend payout of Sh1.50 per share which is inclusive of 20 cents in interim dividend; a special dividend of 60 cents and a final payout of 70 cents.

The performance was posted on the back of a tough operating environment particularly in the fourth quarter of the year that was characterised by rising interest rates and high inflationary pressures which surged by nearly 300 percent between January and December 2011.