Bank of Baroda writes off Shs18.4b
Bank of Baroda also reported a drop in profits for the period ended December 2023. Photo / File
What you need to know:
- Bank of Baroda has also reported a decline in net profits, which during the period, dropped from Shs122.2b in 2022 to Shs116.4b
Bank of Baroda wrote off Shs18.4b worth of irrecoverable loans in the period ended December 2023.
This was a substantial increase from just Shs8m recorded in the same period in 2022.
A loan is written off after a bank is convinced that there is a high likelihood of not being recovered, which allows a financial institution to remove non-performing loans from its balance sheet.
During the year under review, Baroda had only provisioned Shs9.6b to cushion its capital from bad loans, which was still a decline from Shs11.1b put aside in 2022.
A decline in provisioning potentially boosts profitability in the short term, as it reduces the amount set aside for potential loan losses.
Bank of Baroda has also reported a decline in net profits, which during the period, dropped from Shs122.2b in 2022 to Shs116.4b.
The bank also reported a rise in income from Shs261.7b to Shs295.5b due to an increase in interest income from government securities to Shs109.6b and Shs136b from interest on loans and advances, respectively.
However, expenses surged to Shs141.7b from Shs104.8b due to an increase in interest costs on deposits, which surged by 51.4 percent to Shs84.8b.
Non-performing loans - where a borrower is in default and hasn’t made scheduled payments over a period of time - dropped from Shs15b to Shs415m, defying industry data which showed that overall non-performing loan ratio to total gross loans increased from 5.32 percent to 5.76 percent.
The banking industry remains volatile due to an increase in inflationary pressures that have seen a rise in interest rates and depreciation of the shilling.
