StanChart shocks rivals with 43 per cent profit growth

Barclays reported nine per cent drop in its loan book to Sh98.4 billion during the same period.

Mr Etemesi said StanChart had focused on lending to the corporate segment that accounted for 70 per cent of the Sh50 billion loan book.

Lending to this segment of the market left the bank with fewer cases of defaults and a sustained appetite for loans in an uncertain economic environment.

“Our customers are still borrowing to invest in their businesses although at a much lower rate than in the past,” said Mr Etemesi, adding that there has been a growing appetite for consumer borrowing in the high and middle income market segment that form the bedrock of its clientele.

StanChart was also helped by the fact that its gross non-performing loans dropped by 10 per cent to Sh1.8 billion as its peers sunk deeper into the red.

KCB’s gross non- performing loans rose by 60 per cent to Sh12 billion while Barclays’ bad loans rose by 39 per cent to Sh11 billion during the same period.

Default risk

In recent months, increased risk of default in the retail market has seen banks shift their business models in favour of lending to government.

Official statistics show that between May 2008 and May 2009 credit to government grew by 51 per cent while credit to households shrank by 21 per cent.

Banks have also shifted their focus to controlling expenses through the use of the mobile phone and the Internet.

Stanchart said it will be banking on the Sh4 billion investment in technology, done in 2006, to put a lid on its costs and penetrate the market without opening brick and mortar branches.

“Financial markets will move from the high street banks to a more dynamic environment anchored on the use of technology” said Mr Etemesi.

The investment in technology, rising operating costs and a strict lending regime were highlighted as the reasons for StanChart falling behind other banks in the 2008 full-year results.