StanChart interest rate cut piles pressure on big banks

Standard Chartered Bank has piled pressure on top banks after announcing it will cut its base rate by 1.5 percentage points in reaction to the lowering of Central Bank Rate (CBR).

It joins Barclays Bank of Kenya, which on Friday announced a new base rate of 21 per cent down from the previous 22.5 per cent from August 1—leaving KCB Group, Equity Bank and Co-operative Bank among the top five banks that have left the rates unchanged.

The Central Bank on Thursday eased its tight monetary stance by cutting the policy rate to 16.5 per cent from 18 per cent, signalling banks to lower their lending rates as expensive credit weighed down on the economy in quarter one. So far, CFC Stanbic Bank, Bank of Baroda and Commercial Bank of Africa are part of the lenders that have cut their base lending rates by 1.5 percentage points.

“We would like to inform our customers that our base rate will be adjusted to 21.5 per cent with effect from August 1st,” said Standard Chartered Bank. Analysts at Kestrel Capital say that other top banks are set to review their rates downwards as the battle to grow loan books intensifies.

The average base lending rate stood at 23.1 per cent as of last week which analysts say threatens loan repayments in a slow economy.

Already, the appetite for borrowing has waned in what has seen the total industry loan book stagnate at Sh1.2 trillion since September to April 2012.  This helped cut economic growth in the three months to March to 3.5 per cent compared to 5.1 per cent in a similar period a year earlier.

The economy recorded reduced activities in the construction, manufacturing and finance sectors, attributed to expensive credit.