Standard Chartered, Kenya’s fourth largest bank by assets, has outsourced non-core functions to India in a move that is expected to render some 300 employees redundant.
The British lender on Wednesday said it is closing down its Nairobi shared services centre and migrating the unit’s functions to Chennai, India.
The Nairobi centre with a staff of 350 previously provided real-time services such as accounting, reporting, systems maintenance, and information management support to StanChart’s subsidiaries in Uganda, Tanzania, Zambia, Botswana and South Africa.
Lamin Manjang, the bank’s chief executive, said the “redundancy exercise would be carried out in line with local labour laws.
“Migration of the shared service centre from Nairobi to Chennai is in line with the decision made at group level to centralise all shared service centre operations globally,” Mr Manjang said.
Closure of the Nairobi support unit leaves StanChart with three such centres located in India, Malaysia and China.
The shared services workers set to be declared redundant account for about a fifth of Standard Chartered’s total workforce of 1,881 employees as at December 2015.
The looming job cuts at StanChart Kenya will be the second in as many years, with the bank having cut its staff numbers from a high of 2,048 workers in 2014.
StanChart last year incurred a redundancy cost of Sh332.46 million to shed 167 jobs, according to its annual financial report.
StanChart’s staff costs surged eight per cent to Sh6.2 billion in 2015, in what the lender attributed to “redundancy costs as a result of business restructuring.”
The bank had earlier spent Sh148.2 million in staff restructuring costs in the fiscal year to December 2014.
The lender – which is owned 73.89 per cent by London-based Standard Chartered plc – is also grappling with mounting volumes of bad loans that grew 84 per cent in the half year to June to Sh15.3 billion.
StanChart Kenya’s cost-to-income ratio grew for the first time in three years to 45 per cent at the end of 2015 up from 40 per cent in 2014 and 2013, highlighting deteriorating efficiency.
The bank, however, remains Kenya’s most efficient big lender, ahead of peers that registered poorer efficiency ratios.
Equity, which is Kenya’s second largest bank by assets, has a cost to income ratio of 47 per cent, KCB Bank (50.1 per cent), Barclays (53 per cent), and Co-op Bank with 59 per cent as per full-year 2015 financials.
Net profit for the six months ended June 2016 grew by a third to Sh5.2 billion buoyed by earnings from government securities, even as its loan book shrank and loan loss provisions rose.
In its heydays as the darling of Kenya’s banking industry, StanChart was one of the most profitable lenders, but has since lost ground to homegrown lenders such as Equity, KCB and Co-op who have focused on the mass market.
StanChart is currently ranked fourth out of Kenya’s 40 operational banks, with 218,000 deposit accounts and about 54,000 loan accounts, giving the British-owned lender a cumulative market share of seven per cent.
The bank pursues a highly conservative lending approach, targeting corporate, institutional and high net worth clients unlike indigenous rivals who focus on the risky retail and SME segments.
The imminent sackings at StanChart follow a trend by Kenyan lenders, seeking to contain ballooning staff costs by turning to technology in the era of interest rate caps. “Tech platforms will reduce distribution costs, and are an exciting channel,” said Deepak Dave of Riverside Capital.
Islamic lender First Community Bank last week notified employees of an imminent round of job cuts following the passage of a law capping the cost of loans – effectively cutting the wide spreads that banks previously enjoyed.
Sidian Bank, formerly known as K-Rep, targets laying off 108 staff out of the total 560 workers in an exercise expected to cost about Sh70 million, the lender’s managing director, Titus Karanja, disclosed last month.
Family Bank has also announced that it would be laying off an unspecified number of employees in a bid to cut costs, pointing to a wider strategy in the industry to cushion the lenders’ bottom lines.
Kenyan lenders including Co-op, National Bank, KCB, and Barclays, have shed a total of more than 1,000 jobs in the last five years under “restructuring programmes” carried out by consulting firm McKinsey to trim their cost-to-income ratios.