Standard Chartered Bank of Kenya has disclosed that it last year paid $20 million (Sh2.48 billion), being part of loans it had tapped from its parent firm, Standard Chartered Plc.
The lender had tapped the amount in 2013 as an unsecured 10-year subordinated loan to enhance its capital base and had the option to recall the loan after five years.
“In 2022, the Company exercised its right to redeem US$ 20million of the 2013 subordinated debt that was callable,” says StanChart Kenya in the latest annual report.
The transaction cut the bank’s outstanding loans from the parent company to $40 million (Sh4.96 billion) at the end of December last year from $60 million (Sh6.8 billion) in the previous year.
The Kenyan unit had in December 2014 and August 2016 tapped two subordinated loans of $20 million each, adding to the 2013 loan.
“The company has the right to settle these debt instruments in certain circumstances, as set out in the contractual agreements. The issuer also has the right to call the debt instruments,” says the lender.
StanChart says $40 million (Sh4.96 billion) is callable in the next 12 months, meaning that the lender may opt to redeem the amount this year.
The weighted average effective interest rate on the outstanding amount was 1.19 percent last year compared with 4.92 percent in the previous year.
StanChart says the interest on the subordinated debts are referenced to the London Interbank Offered Rate (Libor) but will be pegged on a new interest rate benchmark as Libor gets phased out.
Libor is the benchmark interest rate at which major global banks lend to one another. It is being phased out by June 30, after big banks were found to have manipulated the rate for years, causing distrust in the financial industry.
StanChart debt repayment came in the period it raised net lending to its affiliates in foreign markets by 31.6 percent to Sh83.4 billion, expanding its holding of the facilities which are mostly denominated in US dollars.
The transactions with the sister firms comprised the third largest items in StanChart’s asset base after loans to ordinary customers (Sh139.4 billion) and government securities (Sh104.7 billion).
Banks with common majority shareholders often collaborate and may lend to and borrow from one another. StanChart has scores of affiliates operating in Africa, Europe, the Middle East, Asia and the US.
StanChart’s net profit for the year ended December 2022 grew by 33 percent to Sh12.06 billion, driven by higher interest income and revenue from foreign exchange trading.
The Nairobi Securities Exchange-listed lender has proposed a total dividend payout of Sh22 per share compared with Sh19 in the previous year on the back of increased profitability.
