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Barclays Bank of Kenya Profit Drops 13% After Bad Loans Soar

Barclays Plc’s Kenyan unit said full-year profit declined 13 percent after bad-debt provisions surged and the east African nation’s fourth-biggest lender incurred reorganization costs.

Net income fell to 7.62 billion shillings ($89 million), from 8.74 billion shillings in 2012, Barclays Bank of Kenya Ltd. said today in a statement distributed in Nairobi. That missed the 8.96 billion-shilling average estimate of four analysts surveyed by Bloomberg.

Non-performing loans increased at double the pace of new lending as banks across Kenya boosted credit, said Chief Executive Officer Jeremy Awori. Earnings declined after provisions for bad loans rose eightfold to 1.22 billion shillings and the lender reported a one-time “restructuring cost” of 788 million shillings.

“They have started growing their loan book and customer deposits aggressively compared to previous years when growth in those two areas was flat,” said Joy D’Souza, an analyst at Nairobi-based Kestrel Capital (East Africa) Ltd. “We should see better performance in interest income this year.”

The bank’s shares slipped 2.1 percent to 16.60 shillings in Nairobi, bringing their decline this year to 5.7 percent. Kenya’s FTSE NSE 25 Share Index has declined 1.1 percent.

Net interest income rose 4.4 percent to 18.9 billion shillings, while loans increased 13 percent to 118 billion shillings, Barclays Kenya Chief Financial Officer Yusuf Omari told reporters in Nairobi.

Investment Banking

Barclays Kenya has created a new division for small businesses and another for investment banking to boost earnings, Awori said.

“SME has been an area of growth not just for us but for the country,” he said. “We want to see more customer growth, we want to see a greater share of their business.”

The investment banking division was named as a lead arranger for the East African nation’s maiden Eurobond sale, planned for the first quarter of this year, and is also on the advisory team for Kenya Electricity Generating Co.’s plan to raise capital, Awori said.

“They have a bigger advantage compared to local banks,” D’Souza said. “They have the ability to do large scale deals because they can leverage on Barclays Africa’s balance sheet.”

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