Victoria Commercial Bank’s pristine balance sheet has been stained for the first time in more than a decade after it recorded an Sh18.3 million loan default in the half year ended June.
The small lender attributed the non-performing loan to a tough operating environment in the banking industry.
“The operating environment has been particularly difficult both locally and internationally and this has unfortunately led to some difficulty in repayment by the borrower, as many businesses have experienced,” said Hezron Kamau, Victoria finance manager.
“However, the recovery process is ongoing and likely to be successful.”
The bank set aside Sh7 million to cover for the bad loan, similar to what was provided in June 2016.
Despite the non-performing loan and the rate caps, Victoria managed to register growth in net earnings, interest income and loan book size in the six-month period. Net profit grew 11.5 per cent to Sh307.7 million compared to Sh275.9 million a year earlier. Net interest earnings increased by Sh60 million to Sh618.4 million.
“VCB business model mainly focuses on providing financial solutions to a niche corporate segment. It has always been a policy of the bank to be as competitive as possible and provide interest rates which are fairly priced, through cost and service efficiency models,” the bank said.
Victoria’s loan book expanded 17 per cent to Sh15.5 billion in the half-year period.
Earnings from fees and commissions grew by a fifth cent to Sh144.3 million. Customer deposits rose marginally to Sh15.8 billion from Sh15.6 billion.