14 February 2013

Kenya: Barclays to Cut Jobs Despite Profit Growth

BARCLAYS Bank of Kenya yesterday reported an eight percent growth in profits before tax to Sh13 billion for last year and said it is currently undertaking a cost cutting policy that may see some employees laid off.

The bank said the growth in profits before tax from Sh12 billion in 2011 was aided by a rise in interest income and a reduced loan loss provision. A high interest rate environment in the year however hit the bank hard resulting in a big jump in interest expenses.

Profits after tax, from where shareholders are paid, rose marginally from Sh8.1 billion to Sh8.7 billion. But the bank cut its dividend per share to Sh1, down from Sh1.50 the other year.

It also announced it will not give a Sh0.60 special dividend it gave the other year because it needs to retain some of the profits to boost its capital buffers before the coming into place of new prudential guidelines for bankss next year.

Outgoing managing director Adan Mohamed described the results as impressive given the high inflation and interest rate environment.

He said the bank will continue carrying out cost saving initiatives with an aim to enhance efficiency. This will see a number of employees lose their jobs but Mohamed added this has nothing to do with the an announcement on Tuesday by the parent company of a plan to sack 3,700 employees in some of its operations.

"This is a continous exercise," said Mohamed without giving details on how many staff will be affected.

The banks operating expenses rose to Sh14.4 billion, up from Sh14.2 billion the other year with staff costs rising to Sh7.8 billion compared to Sh7.3 billion the previous year.

Interest expenses on customer deposits, due to the high interest rates, registered a big jump to hit Sh2.2 billion, up from Sh735 million in 2011. For the year, customer deposits rose by Sh13 billion from Sh124.2 billion to Sh137.9 billion.

The loan book grew slightly by Sh5 billion to reach Sh104 billion, up from Sh99 billion with Mohamed admiting this is lower than what the market expects of the bank. He said the institution remains cautious on its lending especially on personal loans. The bank increased it investment in government securities by Sh10 billion from Sh37.5 billion to Sh47.5 billion.

"The bank is in a very healthy position...we are open for business," said incoming MD Jeremy Awori.

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