Family Bank reveals it lost billions over social media rumours

Family Bank has blamed negative rumours circulated through social media last year for its 78 per cent drop in profit before tax for the year ended December 2016. The bank returned profit of Ksh664 million before tax, down from Ksh2.9 billion in 2015.

Speaking while releasing the 2016 financial year results, Family Bank Managing Director Dr David Thuku attributed the big drop in profitability to malicious social media news in November last year purporting that Family Bank was facing closure.

“This put pressure on our liquidity,” he said. “The sustained social media rumours led to five days of significant withdrawals, affecting our profitability negatively. However, relentless employee dedication and customer loyalty have since restored our liquidity.”

A one-off cost of nearly Ksh400 million relating to the staff restructing that saw more than 250 employees retrenched, a slowdown in lending and branch expansion  also ate into its earnings.

Other reasons noted by the bank for the decline in profits include slower growth in the agricultural and manufacturing sectors due to drought and cheaper imports, the interest capping regulation imposed by the government, slower private consumption and delayed government payments which affected asset quality in trade, communication, transport and real estate.

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The bank which is the fifth largest in Kenya based on its branch network of 93 outlets is pursuing a two-prong expansion strategy – brick and mortar and a heavier push towards the digital space. “Our push is skewed towards digital platforms – mainly mobile banking under the revamped PesaPap offering,” adds Dr Thuku.

Banks are re-strategising to absorb shockwaves caused by the recent interest cap regulation amendments on the banking Act. Family Bank has the double task of boosting profits this year and adjusting to the changing environment. “The interest cap regulation is a good thing.  We are re-aligning towards adhering to the regulator as well as making more profits this year,” said Family Bank Chairman, Mr Wilfred Kiboro.

The bank is pursuing alternative business channels like mobile and online banking as well as agency banking among others.

[crp]