Cut in loan loss provisions, bonds income lifts DTB profit to Sh5.2bn

Diamond Trust Bank (DTB) #ticker:DTK reported a 10.7 per cent rise in profit in the nine months ended September, helped by lower loan loss provisions and higher income from government bonds.

The lender’s net profit in the review period stood at Sh5.2 billion compared to Sh4.7 billion the year before.

Its income from treasuries increased by nearly Sh1 billion to Sh9.7 billion after raising its investment in the securities from Sh84.3 billion to Sh98.6 billion.

DTB also reduced its provision for bad debt by nearly Sh500 million to Sh2.3 billion, a move that helped to hold its total operating expenses steady at Sh10.8 billion.

The lower provision came as the stock of gross non-performing loans declined by Sh240.2 million to Sh16.3 billion.

DTB’s loan book rose marginally to Sh197.6 billion but interest income thereon declined by Sh249 million to Sh16.5 billion in an indicator of narrower margins. Interest expenses rose three per cent to Sh11.5 billion, partly reflecting the impact of a 6.4 per cent jump in customer deposits to Sh282.1 billion.

DTB and other banks are set to benefit from the recent removal of the minimum interest payable on interest-bearing accounts.

Such accounts previously earned at least 70 per cent of the Central Bank Rate (CBR), placing their minimum returns at seven per cent for most of the period when the law was in force.

DTB’s non-interest income including fees and commissions rose 6.3 per cent to Sh4.1 billion. Its subsidiaries contributed positively to the group performance, with their consolidated net earnings rising to Sh830.2 million in the review period from Sh731.2 million a year earlier.

DTB has over the years expanded in the local and regional market through a mix of acquisitions and greenfield ventures. The lender in August last year merged its Kenyan banking operations with those of Habib Bank in an all-stock transaction.

Habib was issued with 13.2 million shares in DTB in a deal that raised its ownership in the Nairobi Securities Exchange-listed firm to 16.1 per cent from the previous 11.9 per cent. DTB also raised its stake in its Ugandan unit from 62 per cent to 67 per cent last year after participating in a rights issue by the subsidiary.