BARCLAYS BANK OF KENYA HALF YEAR 2011 ANALYSIS

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Today morning saw Barclays Bank of Kenya (BBK) announce its financial results for the Half Year ending June 30^th 2011

Profit Before Tax rose by 12.6% to stand at Kshs. 5.35 Billion. Profit After Tax, though, was down 2%, at Kshs. 3.64 Billion. Earnings Per Share was at 0.67/= An interum dividend of 0.20/= was declared

The tough operating environment is clearly giving BBK a rough time. This is seen in customer deposits going down by 1.6% to Kshs. 128.4 Billion

The cost income ratio has come down from 64% to 57.2% during the period. Staff costs went down by 15.4% to Kshs. 3.7 Billion from Kshs. 4.38 Billion the previous half. Speaking during the release of the results, Barclays C.E.O Adan Mohammed noted that “Operational efficiency following investments in IT has resulted in a significant drop in our operating expenses; this has resulted in staff cost savings”

Loan loss provision reduced from 702 Million to 393 Million.

Mr. Mohammed said that BBK aims to maximise returns to shareholders through greater operational efficiency; better risk management; deeper client relationships and superior customer service”

The results however, offer little encouragement to shareholders

H1 2010 vs. H1 2011 Analysis

	H1 2010 Kshs.	H1 2011 Kshs.	% CHANGE
TOTAL ASSETS	172.7 BILLION	176.5 BILLION	+2.2%
NET LOANS AND ADVANCES	91.6 BILLION	91.8 BILLION	+0.3%
CUSTOMER DEPOSITS	130.6 BILLION	128.4 BILLION	-1.6%
LOAN:DEPOSIT RATIO	70.1%	71.5%	+1.4%
TOTAL INTEREST INCOME	9.2 BILLION	7.8 BILLION	-15.5%
TOTAL INTEREST EXPENSE	869 MILLION	414 MILLION	-52.4%
NET INTEREST INCOME	8.4 BILLION	7.4 BILLION	-11.6%
TOTAL OPERATING INCOME	13.2 BILLION	12.5 BILLION	-5.5%
TOTAL OPERATING EXPENSE	8.5 BILLION	7.1 BILLION	-15.6%
COST:INCOME RATIO	64%	57.2%	-6.8%
NET NON PERFORMING LOANS	1.8 BILLION	807 MILLION	-56.1%
PROFIT BEFORE TAX	4.75 BILLION	5.35 BILLION	+12.6%
PROFIT AFTER TAX	3.7 BILLION	3.6 BILLION	-2%

The drop in customer deposits is definitely worrying for both management and shareholders. Kenya Commercial Bank had an increase of 12.4% in customer deposits while Equity Bank a 59.4% rise. With no regional subsidiaries to fall on, BBK will struggle to raise deposits in the harsh Kenyan operating environment

Foreign Exchange Income was up 12.9% to Kshs. 1.34 Billion. This was expected as the Kenya Shilling experienced a lot of volatility among major world currencies

Total Fees and Commissions was down 7.5% to Kshs. 3.42 Billion from Kshs. 3.7 Billion

Q1 2011 vs. Q2 2011 (Quarter on Quarter Analysis)

	Q1 2011 Kshs.	Q2 2011 Kshs.	% CHANGE
TOTAL INTEREST INCOME	3.9 BILLION	4.0 BILLION	+2.2%
TOTAL INTEREST EXPENSE	181.2 MILLION	232.5 MILLION	+28.3%
NET INTEREST INCOME	3.68 BILLION	3.71 BILLION	+0.9%
TOTAL OPERATING INCOME	6.2 BILLION	6.3 BILLION	+1.6%
TOTAL OPERATING EXPENSE	3.78 BILLION	3.34 BILLION	-11.6%
COST:INCOME RATIO	61.2%	53.2%	-8%
PROFIT BEFORE TAX	2.4 BILLION	2.94 BILLION	+22.3%
PROFIT AFTER TAX	1.53 BILLION	2.11 BILLION	+37.7%

The Quarter on Quarter figures however, gives a less gloomy picture.

Total Interest Expense was down 28.3% with management hailing investments in IT as the reason. This resulted in Cost:Income improving to 53.3%

Profit Before Tax was up 22.3% from the previous quarter. Profit After Tax was up 37.7% from Q1 2011.

Management issued a cautionary note for the forthcoming periods “as the economy enters into a period of higher inflation and an interest rate environment which may impact businesses in the coming months”

With no more custodial businesses to sell, investors might be forgiven for scampering for safety.