Regional financial solutions provider, I&M Holdings Limited has announced a decline of 6% in its profit after tax for the year ended 31st December 2017 closing in at Ksh 9.9 billion down from Kshs 10.6 billion realised during the same period in the previous year.
The Group attributed its performance on the economic headwinds experienced last year in Kenya and the unintended interest rate capping consequences.
The lender, however, says it has stepped up the pursuit of a prudence based operating strategy to ensure business sustainability.
IMHL also says the implementation of the International Financial Reporting Standard (IFRS) 9 will be good for the industry in the long run, a tacit acknowledgment on the impact of the standard on it financials.
While commenting on the results released on Tuesday, IMHL Chairman Daniel Ndonye said: “We believe the spirit of the IFRS 9 standard, coming on the back of adverse impact of the interest capping has come at an appropriate time that dove-tails with our heightened desire to ensure outmost prudence and appropriate pricing of risk”.
“At an operating income level, we have managed to maintain performance at the same level as prior year. In addition, we have set aside Ksh 4.1 billion from our profit by way of provisions to deal with certain sectors in our book that have demonstrated signs of stress in late 2017.”
Ndonye said the prolonged electoral process in Kenya, had largely constrained economic growth, with the manufacturing sector especially taking a hit.
“In our 44 years of existence, our performance has always closely mirrored that of the Kenyan economy; the country suffers, we suffer.”
I&M Bank Kenya CEO Kihara Maina added that the Bank’s customers who include local manufacturers in the plastic carry bags space, real estate developers, building and construction, and suppliers to the retail sector, had suffered heavily due to unforeseen political, regulatory and market challenges.
“As a responsible banking sector player and conscious of the prevailing challenges, we are committed to support our customers navigate through the hard times by providing a much needed shoulder to lean on,” Kihara said.
While acknowledging the adverse impact of interest rate capping on overall credit expansion the CEO noted that “where the risk reward tradeoff has met both our expectations, i.e. the customer and the bank, our commitment to lend has remained undiminished.”
Buoyed by a commitment to continue supporting its customers using robust credit scoring tools, the Group posted a 13% growth on its loans and advances to customers to close at Kshs 153 billion up from Kshs 135 billion reported the previous years. On the other hand, it displayed a steady capacity to mobilise customer deposits managing to close at Kshs 169 billion up from Kshs 147 billion recorded the previous year and representing a 15% growth.
IMHL’s growth points, Kihara said can be credited to the group’s recently formulated corporate strategy geared at positioning the firm as the preferred corporate and premium personal segments banker of choice across the region.
The growth trend in the banking subsidiaries non funded income, Kihara pointed out has already begun to confirm the viability of the iMarastrategy.
“The growth in the non-funded income stream due to unique value propositions to our customers underpins the efficacy of the strategy as we already see early successes,” Kihara said, adding that, “Looking ahead, the prospects are bright as we continue to deliver to market a wider portfolio of solutions with an expected double digit growth on the non-funded income stream in 2018.”
IMHL attributed the increase in its operating expenses by 6% to the recent acquisition and integration of the former Giro Bank into its system. The acquisition coupled with the ongoing corporate strategy implementation including a strategic expansion of delivery channels and continued focus on investment in people and systems, had served to expand the operating expense base with investment returns on the same expected to accrue in the medium term, he noted.
Though not a key player in the retail banking sector which is enjoying mobile banking growth trends, Kihara noted that large corporates are also fast adopting internet banking solutions among other digital banking delivery channels.
Such adoption of digital banking solutions, he pointed out, will continue to play a key part in the enhancement of service efficiencies at the customer and bank level.
“We have been investing steadily for long term returns by focusing on our people, systems and delivery channels,” he said.
Overall, IMHL, which operates in four countries – Kenya, Tanzania, Rwanda and Mauritius through its subsidiaries, affiliates and joint venture investments in each of these countries, maintained a growth trajectory in its total assets, rising 14% to Kshs 240 billion up from Kshs 211 Billion reported the previous year.
IMHL Director, Sarit Raja-Shah noted that the group’s subsidiaries in Tanzania, Rwanda and Mauritius had helped to enhance shareholder value. “The contribution of our subsidiaries vindicates our regional expansion strategies; regional business now contributes over 20% of overall PBT. We shall continue to take advantage of such opportunities as and when they arise,” he said.
He further added that prudential ratios were sound and well above the regulatory minimum. “As a sign of continuous years of cautious growth, we have set aside significant levels of capital that will ensure the shareholders are not impacted by cyclical challenges. It is with this in mind that the dividend levels have been maintained at the same level as prior year”.
