Diamond Trust Bank Kenya Limited has been given a ‘stable’ rating outlook, due to the lender’s growing franchise in a challenging operating environment.
The South African Global Credit Rating Co. says that DTB maintained a long-term rating of A+ and short-term rating of A1 also due to having a robust regional footprint, improved capitalisation metrics and maintaining a steady improvement in its liquidity position.
DTB’s registered the highest capital adequacy ratio of 23.3 per cent in 2017, which was above the prevailing regulatory minimum of 14.5 per cent and the highest CAR amongst the Top 11 banks in Kenya.
“DTB’s capitalisation provides an adequate buffer against unexpected losses in the short- and medium-term,” said the report.
The group’s capitalisation metrics improved, with total regulatory capital growing by 12.2 per cent during FY17 to register Ksh54.6 billion supported by retained earnings and the acquisition of Habib Bank Limited Kenya.
However, offsetting these key rating strengths is weakening asset quality and a decline in profitability.
The group’s profitability decline is reflected in NPBT decreasing by 8.2 per cent to Ksh10.1 billion as a result of a decline in interest income, an 8.5 per cent decrease in trading income, while operating expenditure grew by 14.8 per cent.
Consequently, the group’s ROaA and ROaE decreased to 2.0 per cent and 15.5 per cent in 2017 respectively.
Total operating income grew by 1.7 per cent in 2017 as net interest income, also grew by 2.4 per cent as a result of interest rate caps which were implemented and the slow growth in lending as a result of the adverse economic conditions in East African economies.
Operating expenses grew by a higher 14.8 per cent in 2016 mainly due to investments in technology and digital platforms. Consequently, the group’s cost ratio increased to 42.6 per cent at 2017 from 37.7 per cent at 2016.