StanChart Kenya chief executive Lamin Manjang. PHOTO | FILE
What you need to know:
StanChart Kenya reported a net profit of Sh10.4 billion for the year ended December compared to Sh9.2 billion in 2013.
The lender relied on cost-cutting to compensate for a weaker performance in its core business, which saw its loan book and deposit base shrink.
StanChart Kenya hit the Sh10 billion after-tax profit mark for the first time riding on property sales to hold on to its ranking as the third most profitable lender in the country.
The bank reported a net profit of Sh10.4 billion for the year ended December compared to Sh9.2 billion in 2013.
The lender relied on cost-cutting to compensate for a weaker performance in its core business, which saw its loan book and deposit base shrink.
Loans declined by Sh7 billion to Sh122 billion while customer savings declined by Sh700 million to Sh154 billion.
“2014 was a challenging year due to increased non-performing loans. 2014 was also the year we reorganised our business repositioning it for the future,” said chief executive Lamin Manjang.
Its loans default book jumped to Sh10.7 billion from Sh3.8 billion, which it attributed to “a small number of problem accounts.”
The bank’s holding of loan securities shot up to Sh4.4 billion indicating that it is turning to collateral to protect itself from the bad loans. This saw its loan provisions grow marginally despite the jump in bad loans as provisions are net of security held by the bank.
The bank, however, booked Sh2.2 billion in other income, which was attributable to a one-off gain from sale of a property. Its operating profit grew by a margin equal to Sh25.9 billion from Sh23.7 billion.
Corporate and institutional business was the key driver of the company performance recording a 17 per cent growth in operating profits from this segment to Sh9.9 billion.
Operating profit from medium sized business dropped to Sh700 million from Sh1.1 billion while that from retail clients was flat.
The bank kept a strong hold on operating expenses, with its cost to income ratio at an estimated 40 per cent.
“Cost efficiency will continue to be a key strength for the bank as it employs prudent cost management strategies helping it to maintain one of the lowest cost to income ratios in the industry” said analysts at Dyer and Blair Investments.
Staff costs rose by 14 per cent to Sh5.6 billion which management attributed to salary increases for staff being sought by competition.
Co-operative Bank, which was closing in on its third position, slid back following a 12 per cent profit drop in 2014.
The management have recommended a Sh17 per share dividend payout up from Sh14.50 last year.
The bank’s share price at the Nairobi Securities Exchange lost marginally to trade at Sh340 per unit down from the previous day’s Sh342 each.
“The lender shed 0.6 per cent on foreign investor selling,” said investment analysts at Standard Investment Bank, who noted that the bank performed below expectations.
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