StanChart's bad debts grow by Sh9 billion

Standard Chartered Bank has been hit by a Sh9 billion surge in non–performing loans in the first three months of the year in what management says was “due to a small number of problem accounts.” PHOTO/FILE 

In Summary

• Manager blames small number of problem accounts for performance

By Ramenya Gibendi
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Standard Chartered Bank has been hit by a Sh9 billion surge in non–performing loans in the first three months of the year in what management says was “due to a small number of problem accounts.”

The bank’s bad debts grew five-fold to Sh11 billion against Sh2.2 billion recorded over the same period last year.

While pointing out that the loan default came from its wholesale banking customers, the bank noted that the overall “quality of its asset book remains good, well diversified and conservatively positioned.

PRECAUTIONARY MONITORING

“Overall, we continue to proactively manage our loan portfolio and remain watchful. While we do not see a broad-based deterioration in asset quality, we have increased the number of clients subject to additional, precautionary monitoring reflecting our proactive approach to managing risk in an uncertain environment,” managing director Lamin Manjang, said in a statement Thursday.

Last year, the Central Bank of Kenya issued new prudential guidelines to banks on the treatment of non-performing loans that had led to a rise in their bad books, compelling them to set aside extra money as provision for defaults.

The new rules now require lenders to classify as non-performing all the loan accounts of a borrower who defaults on repayment of any one of the borrower's multiple loans for more than three months.

BUDGET STRAINS

This provision saw banks’ bad loans in the year ending 2013, jump by 30.9 per cent to Sh80.6 billion, the highest in six years.

A survey by CBK recently revealed that most banks expected non-performing loans to rise in the first quarter of 2014, driven by budget strains in homes after the December festivities and January commitments.

The net bad-debt charge decreased marginally to Sh236 million against Sh254 million charged to the profit and loss account last year, a sign that the bank is optimistic that it will be able to recover the debt.

The bank’s after-tax profit for the period went up 34 per cent to hit Sh2.5 billion, up from Sh1.8 billion recorded over the same period in 2013.

The bank grew its net interest income by 19 per cent during the period to Sh4.5 billion.

“Our business is well positioned to continue being the right partner to our clients,” Mr Manjang said