BY MARTIN MWITA
Standard Chartered’s net earnings for the six months to June dropped by 35 per cent, reflecting the tough business environment for lenders in Kenya under the interest rate cap law.
StanChart posted an after tax profit of Ksh3.4 billion as at June 2017 compared to Ksh5.2 billion made in a similar period last year.
The British lender’s net interest income declined by eight per cent to KShs 9.2 billion down from KShs 10.0 billion during a similar period last year.
The poor performance has been pegged on the effects of the Banking (Amendment) Act, 2016, which capped lending rates and introduced a floor on deposit rates, slowdown in economic activity in the run up to the general elections and an increase in the non-performing loan book.
The bank has reported a 12 per cent fall on interest income on customer loans and advances which closed at KShs 6.9 billion, due to margin compression and lower average balance of loans and advances.
The decline was partially mitigated by higher interest income from government securities, according to the management.
“Though we entered 2017 with cautious optimism, pressure occasioned by external challenges particularly the Banking (Amendment) Act, 2016, is reflected in the performance as we continue to witness deceleration in credit growth. While overall credit quality has remained broadly stable, stresses remain in some areas, “chief executive Lamin Manjang said in a statement,” We remain watchful for signs of deterioration in credit conditions in the market and proactive in our collection efforts to minimise account delinquencies.
The lender’s interest expense increased by 16 per cent from KShs 3.0 billion in the first quarter of last year to KShs 3.6 billion, as a result of higher deposit balances coupled with higher interest paid in line with the new regulation.
Loans and advances to customers declined by eight per cent to stand at KShs 113 billion compared to KShs 123 billion at the close of 2016 .
Customer deposits increased by 20 per cent to close at KShs 224 billion, up from KShs 187 billion at the end of 2016.
Non-interest income decreased five per cent year-on-year to KShs 4.3 billion primarily due to lower foreign exchange volumes.
Operating costs grew by nine per cent to KSh 6.2 billion.
This is due to higher staff costs as well as implementation of the Digital by Design strategy, the management said, which aims to migrate over 80 per cent of transactions to non-branch channels by 2020.
“Standard Chartered has prioritised deployment of technology to promote efficiency and enhance risk management. In the last year, the bank has introduced a mobile app, a revamped online platform, fingerprint log-in technology, video banking and cash deposit machines,” Manjang said.
For the period under review, StanChart’s impairments grew by 69 per cent year-on-year to KShs2.3 billion with gross non-performing loans increasing to KShs16.9 billion from December 2016, blamed on “a small number of problem accounts.”