StanChart blames bad loans, low lending for 39 per cent profit fall

Standard Chartered Bank Kenya CEO Lamin Manjang. FILE | DIANA NGILA | NATION MEDIA GROUP 

In Summary

• The lender, which had already issued a profit warning in November last year, reported after tax earnings of Sh6.3 billion, down from Sh10.4 billion in 2014.
• The bonus share issue of one share for every nine held, will help the bank recapitalise in keeping with the regulatory guidelines.

By GEORGE NGIGE, gngigi@ke.nationmedia.com

Standard Chartered Bank Wednesday announced a 39 per cent drop in after tax profit for the 12 months through December 2015, weighed down by decreased lending and a sharp rise in non-performing loans.

The lender, which had already issued a profit warning in November last year, reported after tax earnings of Sh6.3 billion, down from Sh10.4 billion in 2014.

“The profit drop was due to three factors: an increase in the non-performing loans portfolio; the financial impact of the restructuring from the updated group strategy and a one-off net capital gain in 2014 relating to the disposal of a property,” StanChart chief executive officer Lamin Manjang noted in a statement.

The result sees the lender slide out of the top five most profitable banks in the country to rank sixth, below mid-sized Diamond Trust Bank, which posted net earnings of Sh6.5 billion.

But in what the management says is a show of confidence in the future outlook for the bank, directors are proposing a dividend payout of Sh17 per share, same as that paid in 2014, plus a bonus share issue.

SHARE ISSUE

The bonus share issue of one share for every nine held, will help the bank recapitalise in keeping with the regulatory guidelines.

The lender’s non-performing loans grew by 37 per cent to Sh14.1 billion, forcing it to set aside an additional Sh3.5 billion as provisions for the bad debt.

The provisions, which are accounted for as a deductible expense in profit and loss statement, rose to Sh4.8 billion from Sh1.3 billion in 2014.

Its core business slowed down, resulting in the loan book shrinking by Sh7.6 billion to Sh115 billion, which the bank attributed to higher risk aversion.

“Customer loans and advances are down six per cent as we focused on disciplined balance sheet management and more selective asset origination,” said Mr Manjang.

The bank’s management is optimistic of bouncing back this year, stating that it has a stronger balance sheet and is in a more liquid position.

Mr Manjang had in September disclosed that the bank was also going to undertake staff restructuring by end of the financial year at it looked at cutting costs.

Its staff expenses rose by 8.6 per cent to Sh6 billion from Sh5.6 billion. StanChart’s shares were trading at Sh209 per unit at the Nairobi Securities Exchange, having dropped eight per cent in the past six months.