StanChart issues profit warning after posting dismal nine-month results

Corporate News

Standard Chartered Bank Kenya chief executive Lamin Manjang. PHOTO | FILE 

By VICTOR JUMA, vjuma@ke.nationmedia.com

In Summary

• StanChart expects a maximum net profit of Sh7.8 billion this year compared to Sh10.4 billion in the whole of 2014, reflecting a dip of at least 25 per cent.
• The lender’s earnings have dropped on the back of rising bad debts and the absence of gains on property sales that had boosted its profits last year.
• The bank's net profit in the nine months ended September dropped 24.3 per cent to Sh6.2 billion amid a flat loan book and interest income.

Standard Chartered Bank Kenya has issued a profit warning for the full year ending December after posting a disappointing performance in the nine months ended September.

This means that the lender expects a maximum net profit of Sh7.8 billion this year compared to Sh10.4 billion in the whole of 2014, reflecting a dip of at least 25 per cent.

The bank’s earnings have dropped on the back of rising bad debts and the absence of gains on property sales that had boosted its profits last year.

StanChart’s net profit in the nine months ended September dropped 24.3 per cent to Sh6.2 billion amid a flat loan book and interest income.

The performance was also hurt by a decline in transaction-based income and a sharp rise in loan loss provision.

“Momentum reflects ongoing impact of loans portfolio de-risking initiatives. Given the foregoing (fourth quarter) results of the bank are unlikely to reverse the impact of this and attain results close to or at last year’s levels,” StanChart chief executive Lamin Manjang said in a statement.

“It is reasonable at this time to anticipate earnings for the year ending December 31 , 2015 will be lower than the previous year’s by at least 25 per cent,” he added.

The firm’s loan book rose 0.9 per cent to Sh126.5 billion, reflecting its increased risk aversion in the wake of the rising bad debts.

READ: StanChart’s net profit drops 36pc on bad loans load

StanChart’s gross non-performing loans (NPLs) rose to Sh10.7 billion at the end of September compared to the low of Sh8.3 billion in June. The stock of bad debts had peaked at Sh13.3 billion in September 2014.

“The gains made on recoveries of the NPLs in the first six months have been set back in quarter three and this is disappointing,” Mr Manjang said.
StanChart raised its loan loss provision 49.3 per cent to Sh1.6 billion, ultimately affecting the bottom line.

The conservative lending stance saw StanChart’s interest income rise marginally to Sh16.6 billion in the nine-month period.

The bank took in only Sh2 billion in new deposits, leaving its interest expenses flat at Sh3.1 billion at a time when other lenders have seen a surge in this expense line.

StanChart’s non-interest income fell 17.5 per cent to Sh5.3 billion, a move it attributed to slow business at its custody business when foreign investors reduced their trading activity at the Nairobi bourse out of fear of the now-shelved capital gains tax.

Mr Manjang said the bank would going forward diverse its loan book while tightening its risk appetite. StanChart is also set to restructure its operations.