Treasury bills lift StanChart’s profit to Sh7.7bn despite rise in bad loans

Standard Chartered Bank Kenya’s net earnings for the nine months to September grew by a quarter, thanks to income from government securities, despite a growth in toxic loans.
The lender reported an after-tax profit of Sh7.7 billion as at end of quarter three, compared to the Sh6.2 billion it posted during a similar period last year.

StanChart’s loan book shrank by Sh5.75 billion to Sh120.7 billion as at September 2016, compared to a year earlier.

The lender’s volume of bad loans grew 25 per cent to hit Sh10.2 billion in the period under review. Provisions for non-performing loans increased 8.1 per cent to Sh1.8 billion.

“We are rebuilding the balance sheet with good quality assets, and our capital position continues to be strong though market conditions are expected to be challenging following the capping of interest rates,” said StanChart Kenya chief executive Lamin Manjang.

The lender — owned 73.89 per cent by London-based Standard Chartered Plc — increased its basket of treasury bills and bonds by Sh29 billion to Sh88.8 billion from Sh59.7 billion in quarter three of 2015.

Interest earned from the government papers grew 55 per cent to Sh7.5 billion while income from loans and advances jumped 4.1 per cent to Sh11.4 billion in the period under review.

READ: Interest rates on govt securities fall amid heavy bidding by banks

Deposits increased by a fifth to finished the third quarter at Sh199 billion. This resulted in interest paid to customers grow nearly two-thirds to Sh4.2 billion in the fiscal period.

StanChart’s liquidity ratio remains one of the highest in Kenya’s banking industry at 61.5 per cent against the statutory 20 per cent, highlighting a conservative approach to hold cash and treasuries.