StanChart in biggest profit jump despite loan rates cap

Standard Chartered Bank of Kenya on Wednesday shrugged off effects of legal caps on lending to post a 42.7 per cent increase in net profit last year helped by additional lending to government and lower bad loans’ cost.

The lender has reported net earnings of Sh9.05 billion for the year to December, compared to the Sh6.34 billion a year earlier.

The 42.7 per cent profit growth is the highest among the listed lenders that have announced their results—earning its shareholders a 17.6 per cent rise in dividend of Sh20 a share

KCB Group net profit remained flat at Sh19.7 billion last year, Barclays dropped 12 per cent, Equity’s fell 4.1 per cent while Co-op Bank and DTB Bank rose 8.2 per cent and 17 per cent respectively.

Banks blame their sluggish profit  growth in earnings to the coming into effect in mid-September of capped commercial loan rates at 400 basis points above the benchmark rate—putting the maximum rate on bank loans at 14 per cent. Banks interest were above 20 per cent, guaranteeing lenders double digit profit growth yearly.

This is pushing banks to lend more to the government and avoid risky borrowers.

StanChart lending to government increased to Sh81.5 billion from Sh67.4 billion and income from treasury bonds and bills rose 44.3 per cent to Sh10.06 billion.

Income from lending to homes and firms remained flat at Sh14.8 billion despite increasing lending by Sh7.6 billion to Sh122.7 billion—a pointer to the impact of the rate cap.

Its earnings were also boosted by a 55 per cent drop in its loan loss provisions to Sh2.2 billion which reduced its operating expenses. Gross non-performing loans grew by Sh341 million to Sh15 billion.

Its share price gained 0.5 per cent to Sh201, but results were released after the market closed.