StanChart to cut jobs by December

Corporate News

A Standard Chartered branch in Nairobi. PHOTO | FILE 

By DAVID HERBLING, hdavid@ke.nationmedia.com

In Summary

• The layoffs are part of the bank’s strategy to improve its performance after announcing a profit warning for the year ending December.
• The retrenchment plan comes after its London-based parent Standard Chartered Plc earlier this month announced it will eliminate 15,000 jobs worldwide by 2018.
• The bank's net profit in the nine months ended September dropped by a quarter to Sh6.2 billion amid a flat loan book and interest income.

Standard Chartered Bank Kenya is set to cut jobs by the end of the year, a move it says will lead to retrenchment costs large enough to hurt its full year performance.

The looming layoffs are part of the bank’s strategy to improve its performance after announcing a profit warning for the year ending December.

“There will be a redundancy charge which will impact our full year 2015 performance,” the lender said in a statement without indicating how many employees would be retrenched.

“The forecasted increased impairment and redundancy charges may result in the full year forecasted earnings to 31 December 2015 falling below the 2014 full year earnings by at least 25 per cent.”

StanChart’s retrenchment plan comes after its London-based parent Standard Chartered Plc earlier this month announced it will eliminate 15,000 jobs worldwide by 2018.

Its net profit in the nine months ended September dropped by a quarter 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 provisions.

Its volumes of bad loans grew by nearly a third in the quarter to September to hit Sh10.7 billion.

The imminent sackings at StanChart follow a trend by Kenyan lenders seeking to contain ballooning staff costs by turning to technology.

StanChart’s staff costs have more than doubled over the last five years to hit Sh5.7 billion as at December 2014 from Sh2.8 billion at the end of 2009.

Despite this, the bank remains one of the most efficient institutions with the upcoming layoffs set to further reduce its operating costs.

Its cost-to-income ratio stood at 40 per cent last year, making it the most efficient big lender ahead of KCB (50.20 per cent), Barclays (51.60 per cent), Equity (52 per cent), and Co-op Bank (67 per cent).

READ: StanChart issues profit warning after posting dismal nine-month results

Besides automation of services –which has reduced the need for some roles— banks are increasingly looking to maintain low operating costs by reducing their staff count across various ranks.

Co-op Bank last year laid off 160 mid-level managers at a cost of Sh1.3 billion in a restructuring programme that was informed by a review of the bank’s operations by McKinsey & Co.

National Bank in 2013 also hired McKinsey to advise on reforming the lender’s executive suite which led to the scrapping of two positions of deputy CEO, a freeze on recruitment and retrenchment of 200 employees through a voluntary early retirement scheme.

KCB Bank in 2011 also hired McKinsey to spearhead a restructuring plan that resulted in the scrapping of about 15 director positions as the lender sought to cut reporting layers and increase efficiency.

This led to KCB Group shedding 120 jobs at a cost of Sh1.2 billion in a three-year restructuring plan that closed in 2014 aimed at trimming its wage bill.

Barclays Bank of Kenya has also trimmed its workforce by nearly 420 at a cost of Sh1.7 billion, with the last retrenchment occurring in 2013 when 170 employees left with a compensation of Sh788 million.