State-owned Consolidated Bank has posted a Sh71.96 million half year loss due to increased provisioning for non performing loans.
The bank increased loan loss provision to Sh137.84 million after higher than expected rise in bad loans caused an overshot of in provision by Sh37.41 million over the same period last year. Consolidated bank had made a profit of Sh35.6 million by end June 2015.
The lender increased bad debt provisioning despite a 44.6 per cent drop in gross non performing loans to
Sh1.74 billion from Sh3.14 billion previously.
Over the same period, loans and advances to customers increased slightly by 3.5 per cent from 8.79 billion to Sh9.11 billion, while staff loans totalled Sh644.40 million.
Total interest income generated from loans rose marginally to Sh774.18 million from Sh747.87 million.
However, assets dropped one per cent from Sh14.57 billion to Sh14.41 billion.
Shareholder funds also dropped from Sh1.60 billion to Sh1.54 billion.
Consolidated Bank is 95.6 per cent owned by the state through the National Treasury.
In the last three years, the bank has not met the minimum capital ratios prescribed in the revised prudential guidelines.
The bank's core capital
as at end June was Sh1.01 billion, while total risk weighted assets stood at Sh14.35 billion.
The prudential guidelines which were gazetted in the Finance Act 2015 call for a progressive increase in core capital for each of the 41 banks from Sh1 billion to Sh5 billion by end of 2018.
The capital will be increased from Sh2 billion by end of 2016, then to Sh3.5 billion by end of 2017 and finally to Sh5 billion by end of 2018.
This means Consolidated Bank requires about Sh900 million to comply with the ratios.
This is over and above the capital needed to support the implementation of its business plans.
Treasury Cabinet secretary Henry Rotich recently said the government is working on modalities to merge the Consolidated Bank, Development Bank of Kenya and National Bank.
The merger is aimed at creating a strong lender out of the three and to comply with the prudential guidelines ahead of the December deadline.