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BOB_2017_SMALL

REPORT OF THE DIRECTORS

REPORT OF THE DIRECTORS The directors have pleasure in submitting their report on the financial statements of Bank of Baroda (Kenya) Limited for the year ended 31 December 2017. 1. Principal activity The bank is licensed under the Banking Act and provides banking, financial and related services. There have been no material changes to the nature of the bank’s business from the prior year. 2. Review of financial results and activities The financial statements have been prepared in accordance with International Financial Reporting Standards and the requirements of the Kenyan Companies Act, 2015. The accounting policies have been applied consistently compared to the prior year. Despite the interest cap law and difficulty turbulence experienced in the industry during the year ended December 31, 2017, we have managed to sail through and improve in all aspects of business level and profitability 3. Dividends The directors propose a final dividend of K Sh 20.00 per share (2016: K Sh 10.00 per share) amounting to K Sh 989.716 million (2016: Kshs. 494.858 million). 4. Directors The Directors of the bank during the year and to the date of this report are as follows: Mr. Yatish C. Tewari (Resigned w.e.f 08.12.2017) Mr. Saravanakumar A. (Appointed w.e.f 08.12.2017) Mr. Philip Burh (Resigned w.e.f 15.01.2018) Mr. Patrick K. Njoroge Mr. Yogendra Singh Saini (appointed w.e.f 01.03.2018) Dr. Winfred N. Karugu Mr. Ashok Kumar Garg (Appointed during 2017) Mr. Eric Francis Tucker (Appointed during 2017) Mr. Ramesh Chunilal Mehta (Appointed during 2017) 5. Events after the reporting period The directors are not aware of any material event which occurred after the reporting date and up to the date of this report. 6. Independent auditor The Auditors, Messers Grant Thornton, continue in office in accordance with Section 719(2) of the Kenyan Companies Act, 2015 and subject to Section 24(1) of the Banking Act (Cap. 488). 7. Relevant audit information The directors in office at the date of this report confirm that; a) There is no relevant audit information of which the company’s auditor is unaware; and b) Each of the directors has taken all the steps that they ought to take as a director so as to be aware of any relevant information and to establish that the company’s auditor is aware of that information. 8. Business overview Deposits stood at Kshs 73.01 Billion (increase by Kshs 8.13 Bn) and grew by 12.53%. Advances (Gross) stood at Kshs 43.94 Billion (increase by Kshs 5.85 Bn) and grew by 15.37%. Total Business stood at Kshs 116.95 Billion (increase by Kshs 13.98 Bn) and grew by 13.58%. 12

REPORT OF THE DIRECTORS ANNUAL REPORT AND FINANCIAL STATMENTS 2017 The ratio of Gross NPA as a percentage of total advances reduced to 6.07% as at December 31, 2017 compared to a ratio of 8.91% as at December 2016. Net NPAs stood at Kshs 930 Million as at December 31, 2017 compared to Kshs 1.70 Billion as at December 31, 2016. The Ratio of Net NPAs to Gross Advances was 2.26% in the year down from 4.47% of 2016. While efforts are already on to either upgrade the recently downgraded accounts or recover the accounts in full, the recovery process by initiating legal action has also been started in cases where the businesses have been closed down and other cases in default. Interest income increased by 8.95% to reach Kshs 10.45 Billion for the year ended December 31, 2017 compared to Kshs 9.59 Billion of year 2016. Included in the interest income was Kshs 5.26 Billion relating to interest earned on government securities. It is as a result of prudent and timely decisions that, we have been able to increase Interest income from treasury investments which accounts for 50.5% of the total interest income for the period ended December 31, 2017. We have been able to manage the interest paid on deposits and thus the improvement on profits. The total interest paid on deposits marginally increased to Kshs 4.59 Billion for the period ended December 31, 2017 compared to Kshs 4.53 Billion for the period ended December 31, 2016. During the year we sold one of the Bank`s property located along Tom Mboya Street at a profit of Kshs. 322mn and this increased our non interest income. Thanks to our strong Bank policies and our sound banking system and am confident that our Bank has the capacity of a steady and sustainable perfromance Future Outlook The bank will continuously look for available opportunities to tap business to ensure a sound and healthy business portfolio. To achieve this, we intend to increase promotional / awareness activities relating to recently introduced services for instance, VISA Debit Card, Baroda M-passbook and others like mobile banking, FDR online application and interbank/Rapid Funds online transfers. Our assertion on sustainability will be achieved by appropriate appraisal of advances proposals to maintain good health of credit portfolio. We intend to increase our loan book to maintain interest revenue by taking advantage of increased business volume to counter the negative impact of interest rate capping, hence quality credit shall be a key driver to growth in profits. The bank has already began the construction of its Head Office which shall constitute a Corporate Branch. The construction is expected to be complete within the next year. This project will bring good visibility to our bank and would help in strengthening our roots and relationship in the country. To boost our image, we foster to play an active role in the “give back to the society” through augmenting the principle of Corporate Social Responsibility (CSR). The bank would always look for opportunities to participate in developmental activities for the society at large. 9. Approval of financial statements The financial statements were approved at a meeting by the board of directors on March 26, 2018, and were signed on its behalf by: By order of the Board ________________________________ Company secretary 13