KABANDA CHULU, Lusaka
AN INCREASE in interest rates to 40 percent on Kwacha denominated loans and advances at the start of 2016 pushed Investrust Bank Plc to record a net income of K40 million compared to the K37 million recorded the previous year.
Nevertheless, the bank’s profit on foreign exchange trading was severely constrained recording a reduction of 16 percent to K15.4 million compared to K18.3 million due to the tight liquidity in the foreign exchange market especially from the mines and volatility of the exchange rate due to uncertainty during run up to the election period.
The only indigenous bank listed at the Lusaka Securities Exchange (LuSE), also reduced its total operating costs by 16 percent to K148 million in 2016 compared to K183.3 million the previous year.
This is attributed to the prudential costs and reduction strategy management adopted during 2016 that led to reductions in a number of expense lines such as salaries, general administration expenses, repairs and maintenance but total operating costs were contained below budget.
According to the final financial results for last year released by Investrust Bank company secretary Cuthbert Tembo, that financial performance of the bank is positive.
“The bank’s net interest income grew by eight percent in 2016 owing to an increase in interest rates on Kwacha denominated loans and advances at the start of last year following the increase by the central bank on policy rate by three percent and the lifting of interest capping in November 2015.
“As a result of the increase in interest rates on Kwacha denominated loans and advances, impairment charges increased by 15 percent in 2016 to K9.55 million compared to K8.32 million,” it stated.
However, Investrust said that tight liquidity led to an increase in the bank’s overall funding costs forcing the institution to engage in active borrowing through the money markets and from Bank of Zambia.
“Consequently, interest expense increased by 20 percent to K130 million in 2016 compared to K109 million compared to the previous year,” it stated.