Money Markets
StanChart shocks rivals with 43 per cent profit growth
Standard Chartered chief executive officer Richard Etemesi during the release of the bank’s half-year results on Wednesday at a Nairobi hotel. Photo/WILLIAM OERI
Standard Chartered Bank posted a 43 per cent rise in half-year profit, helped by a 30 per cent rise in interest income on loans and advances.
The bank, which is Kenya’s third biggest by assets, said its profit before tax rose to Sh3.3 billion from Sh2.3 billion realised in a similar period last year, breaking away from industry trend that has seen major players’ profits drop to single digit levels.
The results came as a relief to the bank that last year stood alone in the territory of modest profit resulting from a business model hinged on selective lending as its rivals reaped super profits from the mass market
The results put StanChart above its rivals KCB and Barclays that returned single digit profits during the same period.
StanChart’s full-year profit before tax dropped four per cent to Sh4.7 billion in 2008 as its main rivals Equity posted 111 per cent profit growth to Sh5 billion and KCB’s profit leaped by 42 per cent to Sh6 billion.
Barclays’ profit grew by 13 per cent to Sh8 billion during the same period.
Richard Etemesi, the bank’s managing director, said the results resulted from double digit growth in lending to companies and sale of banking services to a select group of individuals in the top and middle segment of the market.
“We have a long-term strategy and we will stay focused on it. Our model sticks to the basics of banking and growing niche markets,” said Mr Etemesi.
Analysts said StanChart’s results offered fresh insights to business models that work for banking sector players in the boom time and during an economic slowdown.
“It points to the fact that quality lending is the winner when the chips are down as opposed to the boom time when the magic is in the mass market,” said Freda Jones, an independent financial analyst based in London.
Banks make money from lending, at a fee, the deposits they receive from customers.
This means that success of the lending business depends on their ability to raise deposits in the same market.
Profitability in the financial services sector is usually subdued in a difficult economic environment as is the case now because of increased default rate among borrowers and the thinning out of deposits.
During the first six months of 2009, StanChart led its peers in the loans business, growing its loan book by 16 per cent to Sh50 billion.
That growth in lending translated into a 30 per cent increase in interest income from loans and advances to Sh2.8 billion compared to KCB’s 11 per cent growth to Sh103 billion.
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