State-owned Consolidated Bank of Kenya has after a decade of loss making bounced back to profit in the first half of the year riding on higher interest income and cost-cutting.
The bank reported a profit after tax of Sh12 million for the six months ended June up from a Sh84 million loss in the same period last year, to break a trend of making losses that started in March of 2016.
Consolidated Bank’s interest income rose 21 percent buoyed by a jump in earnings from government securities accompanied by reduction of interest expenses.
Interest from Treasury bills and bonds grew to Sh359 million from Sh236 million following a 75 percent increase in its holding of government securities to Sh7.5 billion.
Customer deposits with the bank rose 7.9 percent to Sh12 billion with borrowing from the Central Bank of Kenya being the main source of cash invested in government securities. Borrowings from the lender of last resort rose by 60 percent to Sh5.3 billion from 3.3 billion in June 2024.
The increase in customer deposits helped boost the bank's liquidity ratio which stood at 30.2 percent against a regulatory requirement of 20 percent.
Consolidated Bank has been forced to be creative in doing business with capital shortfalls limiting its ability to book new business. Its loan book shrunk by Sh735 million to Sh8 billion.
The lender, whose capital levels remained below statutory requirements, cut its operating expenses by four percent to Sh812 million from Sh848 million.
The lender reduced its staff costs in the six-month period by Sh5 million to Sh349 million with management forced to look at cost cutting to spur growth as the government continued withholding its support despite persistent calls for cash injection.
“The group’s total operating expenses closed at Sh812 million which represented a four percent decline from the Sh848 million recorded the previous year, coming from implementation of strategic initiatives, cost containment measures and improved operational efficiencies,” said Consolidated Bank Chief Executive Officer Sam Muturi.
Consolidated Bank has been in the red for the last nine years with losses wiping out its core capital to negative Sh731 million. Its accumulated losses are Sh4.4 billion with the lender non-compliant in all capital parameters set by the Central Bank of Kenya.
Its core capital to total deposit liabilities ratio is at negative 5.8 percent against a mandatory eight percent while its total capital to total risk weighted assets is at negative 6.1 percent against statutory 14.5 percent.
The National Treasury which owns 93.5 percent of the bank has failed to heed pleas to inject cash in the lender for the last 12 years.
“We will continue building on the strategic initiatives undertaken over the last three years to transform the position of the bank, and we are pleased to note that they have already started bearing fruits,” said Mr Muturi.
