StanChart’s net profit drops 36pc on bad loans load
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Standard Chartered Bank’s rising load of non-performing loans has pulled down its net profit for the six months to June by 36 per cent and seen the lender overtaken by two of its peers.
StanChart’s extraordinary drop in profitability has precipitated a shift in ranking of the country’s tier one commercial banks.
With all six top-tier banks having released their half-year results, StanChart has now slipped to fifth position after it was overtaken by its two rivals which posted increased profits.
Standard Chartered Bank’s rising load of non-performing loans has pulled down its net profit for the six months to June by 36 per cent and seen the lender overtaken by two of its peers.
The lender Thursday reported that its half-year net profit dropped to Sh3.9 billion from last year’s Sh6.06 billion, as its loan loss provision increased 51.2 per cent to Sh1.3 billion.
StanChart’s increased provisioning is despite the fact that gross non-performing loans during the period went down 42.8 per cent to Sh8.34 billion, while net loans dropped by Sh8.45 billion to Sh123.5 billion.
This performance has now seen Co-operative Bank and Barclays Bank of Kenya overtake StanChart after posting Sh6.2 billion and Sh4.6 billion in half-year net profits respectively.
“The performance in the first half was subdued largely due to the after-effects of the sharp increase in our non-performing loans book in 2014,” Lamin Manjang, StanChart chief executive officer, said in a statement.
“One large name deteriorated in quarter one and we had to take a lumpy impairment charge in March 2015 which has increased the impairment charge…and this has impacted our bottom line.”
StanChart’s 2014 half-year earnings were boosted by the sale of property from which it booked a gain of Sh1.4 billion, an income which was missing this year further suppressing its performance.
The bank’s interest income on loans during the period decreased 8.9 per cent to Sh7.2 billion on account of the lower loans advanced to its customers, highlighting the lender’s predicament.
Customer deposits rose by 9.3 per cent to Sh1.65 billion, attracting a higher interest expense of Sh1.67 billion up from the Sh1.52 billion paid out during a similar period last year.
StanChart’s extraordinary drop in profitability has precipitated a shift in ranking of the country’s tier one commercial banks.
According to last year’s half-year results, the lender was ranked third behind KCB and Equity Bank, which posted Sh8.1 billion and Sh7.6 billion net earnings respectively.
StanChart at the time recorded a Sh6.06 billion net profit, staying ahead of Co-op Bank and Barclays which posted Sh4.5 billion and Sh4.2 in net earnings respectively.
With all six top-tier banks having released their half-year results, StanChart has now slipped to fifth position after it was overtaken by its two rivals which posted increased profits.
“We have taken decisive action to de-risk our portfolio and whilst this has resulted in a material drag to our income it has improved the overall quality of the portfolio and risk profile for the business,” said Mr Manjang.
The bank’s NPL ratio currently stands at 6.5 per cent and the bank’s management sees it coming down to the industry average of 5.7 per cent in the “next 6 to 12 months”.
I&M has also released its six-month results Thursday, posting a 29.5 per cent increase in half-year net profit on higher interest income.
The firm’s after tax profit for the six months to June stood at Sh3.4 billion compared to Sh2.4 billion posted during a similar period last year.
The lender’s net interest income jumped from Sh8.4 billion to Sh10.1 billion while net fees and commissions increased 23.7 per cent to Sh1.2 billion.
An increase in operating expenses from last year’s Sh2.5 billion to Sh3.09 billion, however, pulled down earnings, with staff costs constituting Sh1.65 billion or 53.4 per cent of this expense.
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Note: The results are not exact but very close to the actual.
