I&M Group’s net profit jumped 17.4 percent to Sh5.6 billion in the half year ended June 2024, helped by higher income from lending to customers at a time of high interest rates in the economy.
The tier one lender reported a 35.2 percent jump in net interest income to Sh16.5 billion in the period. I&M’s Kenyan unit drove the growth in interest income, increasing its net interest income by 37 percent to Sh11.2 billion.
The lender also saw an increase in its cost of funds as a result of higher interest rates, with interest paid on customer deposits rising by 65 percent to Sh12.03 billion.
On the cost side, operating expenses rose 14 percent to Sh14.3 billion after staff costs rose by a fifth to Sh4.18 billion, reflecting the bank’s ongoing expansion drive which saw it open eight new branches in January with plans to add 12 more by the end of 2024.
Meanwhile, the bank’s non-funded income declined by 11 percent to Sh6.16 billion, mainly due to a 38 percent drop in forex trading to Sh1.82 billion as the shilling strengthened against the dollar.
The regional units contributed 30 percent to the Group’s operating income, which stood at Sh22.67 billion for the period. The contribution from the regional units was 28 percent a year earlier when the lender reported operating income of Sh19.1 billion.
“Operating income was driven by significant growth in the corporate and retail segments, which saw increases of 49 percent and 34 percent respectively,” I&M Group said in a statement on its financial results.
Banks have this year capitalised on higher interest rates in the economy to boost profits even as they grapple with rising defaults as borrowers struggle with high repayment costs in a tough economic environment.
The Central Bank of Kenya (CBK) raised its base rate from 12.5 percent in December 2023 to 13 percent in February 2024 and held it there until earlier this month, when its monetary policy committee cut it to 12.75 percent. In the first half of 2023, the base rate was held between 8.75 percent and 9.5 percent.
However, higher interest rates have reduced demand for credit, with private sector credit growth falling to four percent in the year to June 2024 from 13.9 percent at the start of the year.
I&M’s loan book grew by 5.3 percent to Sh284.1 billion by the end of June compared to a year earlier, while customer deposits grew by 17.5 percent to Sh419.4 billion over the period.
