StanChart profit alert, Barclays sale report raise eyebrows
A Standard Chartered Bank branch in Nairobi. The lender intends to cut jobs. PHOTO | PHOEBE OKALL
What you need to know:
Local banks outpaced their multinational rivals in the earnings race as at the end of September 2015, reflecting the growing gap between the two groups.
Locally-owned banks have a higher risk threshold and are always developing new financial products for their customers.
The local lenders have in recent years upset the earnings applecart to dominate the top three positions.
The performance of top-tier foreign-owned banks operating in Kenya will come under sharp focus this year after reports emerged of a likely sell-out of Barclays Kenya’s business by its London-based parent and its British counterpart Standard Chartered issued a profit warning.
Local banks outpaced their multinational rivals in the earnings race as at the end of September 2015, reflecting the growing gap between the two groups.
Even with the profit contribution by their East African subsidiaries excluded, local banks continued to record a much higher growth rate than their foreign counterparts in their Kenya business units.
Standard Investment Bank (SIB) analyst Francis Mwangi, attributed the disparities in earnings growth to the difference in operational strategies employed by the two groups of lenders.
“The foreign-owned banks have a minimum risk appetite. They have opted to be conservative,” said Mr Mwangi in an interview. “But the local banks are more aggressive in seeking new business,” he added.
Besides the profit alert, StanChart has also announced plans to cut jobs to reduce operational costs and grow earnings. The high-street lender - owned 73.89 per cent by London-based Standard Chartered plc – is also grappling with mounting volumes of bad loans that grew by nearly a third in the quarter to September hitting Sh10.7 billion.
Analysts in a Cytonn Investments report termed StanChart and CfC Stanbic – controlled 60 per cent by ICBC Standard Bank Plc – as “negative growth banks” and designated Barclays as “anaemic.”
Co-operative Bank’s after-tax profit jumped 36.6 per cent to Sh8.6 billion at the end of quarter three to make it Kenya’s fastest growing large bank followed by Commercial Bank of Africa (CBA), which posted a 29.6 per cent growth in net earnings to Sh2.55 billion.
Equity Bank recorded a 14.3 per cent net profit growth to Sh12.8 billion while KCB’s earnings surged by a 10th to hit Sh13.5 billion—ranking as Kenya’s most profitable lender in the period.
On the flipside, CfC Stanbic Bank saw its net profit tank by a third to Sh2.7 billion in the nine months to September while Standard Chartered reported an after-tax profit drop of a quarter to Sh6.2 billion in the same period.
Barclays Bank posted a modest 2.7 per cent profit growth to Sh6.4 billion at the end of third quarter.
In their heyday, Barclays and StanChart were the most profitable lenders but have since lost ground to the home-grown banks that have focused on the higher-risk but higher-returns mass market.
Mr Mwangi said that locally-owned banks have a higher risk threshold and are always developing new financial products for their customers.
The local lenders have in recent years upset the earnings applecart to dominate the top three positions.
KCB Bank, Equity and Co-op now top the earnings charts in that order.
Indigenous lenders have a more promising outlook according to Cytonn Investments, with Equity and KCB seen as “stable growth banks” while Co-op Bank was labelled strong growth in the report.
The growth of local banks is driven by “alternative service delivery channels, cost containment initiatives, expansion both regionally and domestically, and the growing retail segment,” says Cytonn.
KCB in March partnered with Safaricom to launch KCB–M-Pesa, Equity runs Equitel, Co-op Bank’s M-Co-op Cash and CBA’s M-Shwari are some of the mobile banking apps which allow deposits, loan processing and payment of bills on their customers phones.
London-based Barclays plc, which owns a 42.6 per cent stake in the Kenyan unit, a fortnight ago announced that it is mulling over selling some or all of its subsidiaries in Africa.
Equity, KCB, Co-op and CBA jointly control more than a third or 35.42 per cent of Kenya’s banking industry according to data from the Central Bank of Kenya.
Kenya currently has a total of 41 operational commercial banks following the collapse of Imperial, Dubai Bank and closure of Charterhouse Bank.
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