StanChart maintains dividend as profit dips 39pc on bad loans rise
Standard Chartered CEO for Kenya and East Africa Lamin Manjang. PHOTO | FILE
Standard Chartered Bank Wednesday announced a 39 per cent drop in after tax profit for the 12 months through December 2015 weighed down by decreased lending and a sharp rise in non-performing loans.
The lender, who had already issued a profit warning last November, reported an after tax profit of Sh6.3 billion down from Sh10.4 billion in 2014.
“The profit drop was due to three factors: an increase in the non-performing loans portfolio, the financial impact of the restructuring from the updated group strategy and a one-off net capital gain in 2014 relating to the disposal of a property,” StanChart chief executive Lamin Manjang noted in a statement.
The result sees Stanchart slide out of the top five most profitable banks in the country to rank sixth below mid-sized lender DTB which posted net earnings of Sh6.5 billion.
But in what the management says is a show of confidence in the future outlook for the bank, directors are proposing a dividend payout of Sh17 per share, same as that paid in 2014, plus a bonus share issue.
The bonus share issue of one share for every nine held will help the bank recapitalise in keeping with the regulatory guidelines.
The bank’s non-performing loans grew by 37 per cent to Sh14.1 billion, forcing the lender to set aside an additional Sh3.5 billion as provisions for the bad debt.
The provisions, which are accounted for as a deductible expense in profit and loss statement, rose to Sh4.8 billion from Sh1.3 billion in 2014.
Its core business slowdown resulting in the loan book shrinking by Sh7.6 billion to Sh115 billion which the bank attributed to higher risk aversion.
“Customer loans and advances are down six per cent as we focused on disciplined balance sheet management and more selective asset origination,” said Mr Manjang.
The slowdown in lending resulted in lower interest income from loan of Sh759 million and a 9.1 per cent drop in fees and commissions charged on debt processing.
“Further there was loss of momentum as we implemented the new organisation structure,” said Mr Manjang.
The shift in business focus saw the bank increase lending to government by an additional Sh15 billion pushing its investment in Treasury bills and bonds to Sh73 billion from Sh58 billion. It earned Sh6.9 billion from the government up from Sh5.9 billion the previous period.
Customer savings with the bank rose by Sh18 billion to Sh172 billion.
The bank’s management is optimistic of bouncing back this year stating that it had a stronger balance and is in a more liquid position.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
