Stanchart CEO Kariuki Ngari on banking the affluent

Standard Chartered Bank Kenya Chief Executive Officer Kariuki Ngari. ILLUSTRATION | JOSEPH BARASA | NMG

Standard Chartered Bank Kenya raised its dividend payout by 32 percent to a record Sh29 per share as net profit for the financial year ended December 2023 grew 15 percent to Sh13.8 billion.

The lender’s chief executive Kariuki Ngari spoke to the Business Daily about what drove the growth, what it takes to stick to one’s playbook even during a season of turbulence and what banking the affluent looks like.

You have increased dividends by 32 percent as profits grew. What worked for you in the year loan defaults were mounting?

For us, it was about focusing on ourselves. It was about having a clear strategy, sticking to it and ensuring there is no distraction even when it got rough at times.

We focused on the four strategic pillars, including network, affluent, mass retail and sustainability and looking at the opportunities in each of these pillars. There were clients that were expanding even in the tough economic environment and it was about working with them to seize the opportunities they were seeing.

You are going to distribute nearly 80 percent of the profit as dividends. What has influenced such a generous payout? How does your dividend policy look like?

We do have a capital risk appetite that is calibrated to allow us to retain enough to support our growth and any excess, we give it back to the shareholders. For us, we don’t target to distribute a certain percentage of earnings. What we work with is our capital risk appetite which takes into account the minimum capital we require.

One of the sticky issues for the better part of 2023 was a pile-up in loan defaults yet your stock of gross non-performing loans (NPLs) declined 31 percent to Sh17.22 billion. How did you achieve this?

Your risk appetite determines the quality of your loan book. We do have processes to manage emerging issues so that they do not become NPLs and it includes supporting our clients.

We had a closure of historical NPLs we had with our clients. The reduction was about Sh7.5 billion. It was about being flexible and listening to the proposals being made by the customers. It is about sitting down and saying “How can we work this out?” That helped.

StanChart is big on affluent banking. Which trends are you noticing in this group of customers in light of the prevailing economic situation?

Alternative investments. That is big. We want to be able to give these clients options. Back in time, the only option was fixed deposits and we used to spend a long time discussing the rate of return. But having an alternative is very important for our clients.

We now have 180 funds. In the affluent, we see the search for alternatives coming out strongly. That we can give them options is one of the key drivers. As clients continue to understand these products and search for opportunities outside Kenya, we continue to strengthen our digital platforms to deliver this.

Late last year, you announced a Sh4 million minimum account balance for priority banking and also Sh10 million minimum monthly cash flow for SMEs accounts. What were you trying to achieve here? One would have imagined that in a tough economic environment the logical thing would have been to relax the terms.

Intuitively, that is what you think should have happened but it is important to stick to our strategy. For affluent, it (the terms) was nothing new. It was just re-emphasising that ‘this is what the package gives you.’

When you are in priority banking, you have a dedicated relationship manager and a dedicated relationship team you can call 24 hours a day and that is a cost to the bank. So, if you are not maintaining the standards, it is unsustainable. Some people, over time, forget and withdraw the money then it becomes a big cost for us.

For business banking, it is the same. You realise that over time, some clients in your portfolio have stopped doing business with you or moved elsewhere and are therefore doing little with you.

That was about ensuring people and businesses are at the right threshold and we are serving them the way we should.

StanChart staff numbers have been dropping, yet staff costs keep rising. Why the mismatch?

We are paying salaries and there is inflation. At any given time you are adjusting for inflation. If you look at Kenya in the last couple of years, you have seen how inflation numbers have been and so you have to keep adjusting to pay competitive salaries. We believe we pay competitive salaries.

You have to factor in that, yes, you have fewer staff but payment per staff is higher. When you look at our business structure, it is relationship-led and so you need the right calibre of relationship managers.

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