(Adds comments from the CEO)
By George Obulutsa
NAIROBI Feb 22 Barclays Bank of Kenya
will focus on growing its non-interest income after a jump in
bad debts and a government cap on lending rates cut its 2016
pretax profit by 10 percent, it said on Wednesday.
The cap on lending rates, introduced last September, was
expected to squeeze margins and profits at Kenyan banks. The cap
limits commercial bank lending rates at 400 basis points above
the central bank rate, which stands at 10 percent.
The government brought in the cap because it said lending
rates were too high. Businesses in Kenya had complained that
high commercial lending rates charged by the banks had hindered
"In general it has impacted our revenue line in the region
of about 15 percent," Jeremy Awori, the bank's CEO, told
The bank's pretax profit fell to 10.85 billion shillings
($105 million) from 12.07 billion shillings a year earlier, hurt
by increased provisions for bad debts and the rate cap. Revenue
rose 8 percent.
"We are growing our non-funded income, especially as our
interest income starts getting impacted," Awori said, referring
to non-interest income generated by selling other products such
Awori said banks were moving swiftly to find new revenue
streams to make up for the expected income squeeze from the rate
Economists had said the interest rate cap risked hurting
economic growth by discouraging lending to smaller borrowers who
are deemed more risky.
Provisions for bad debts rose to 3.92 billion shillings from
1.77 billion shillings a year earlier as bad debts nearly
The bank attributed the rise in non-performing loans to job
losses at companies that caused personal borrowers to default.
The bank is part of Barclays Africa, where majority owner
Barclays Plc, is reducing its stake.
($1 = 103.4300 Kenyan shillings)
(Additional reporting by John Ndiso; Editing by Duncan Miriri
and Jane Merriman)