Stanbic and NIC Bank have kicked off what is likely to be a “new normal” for banking industry, underpinned by reduced profitability.
The industry is grappling with a growing rate of loan defaults which started in 2015, amid interest controls to protect borrowers from high loan charges and tight regulations to enhance sound corporate governance.
Stanbic Bank on Friday became the second medium-sized lender to report a drop in net profit for three months through March 31, largely on rising bad debt and reduced interest earnings.
Stanbic’s profit after taxation slowed by 9.24 per cent to Sh1.08 billion from Sh1.19 billion it posted 12 months earlier.
Net interest earnings contracted by 12.23 per cent to Sh2.44 billion, the country’s eighth largest lender by market share said in a financial statement. The bank, however, advanced Sh11.81 billion, or 11.40 per cent, more loans to hit Sh115.37 billion in the first quarter of the year compared to the year before.
Non-performing loans over the period jumped by nearly a third, rising 29.73 per cent to Sh5.76 billion resulting in a 32.80 per cent rise in provisions to Sh1.66 billion.