Capital Markets

StanChart reviewing loan pricing ahead of CBK risk-based model approval

Standard Chartered CEO Kariuki Ngari during the launch of a business proposition dubbed Standard Chartered Women International Network (SC WIN) which leverages the power of Standard Chartered’s unique global footprint to help women-led businesses grow at home and abroad on July 31, 2023, in Nairobi. PHOTO | LUCY WANJIRU | NMG

Standard Chartered Bank Kenya has adjusted interest rates up to 19 percent for its riskiest customers in its latest loan repricing cycle.

The bank however says it is reviewing its loan pricing metrics even as it awaits the approval of the Central Bank of Kenya (CBK) for risk-based pricing.

“Our range is between 12 percent to a maximum of 18 or 19 percent to the riskiest borrower but we are still fine tuning the model to get one that best works for us and our clients,” StanChart chief executive Kariuki Ngari told the Business Daily on Monday.

Read: StanChart profit hits record Sh12.4 billion

While 33 banks have already received approvals for risk-based pricing as of May, the lender is still awaiting the regulator’s nod.

Peer banks including KCB Bank Kenya, Stanbic Bank and Absa Bank Kenya have however received CBK’s approval.

Commercial banks have lifted their benchmark lending rates in recent weeks in response to the tightening of monetary policy by the CBK, which left the Central Bank Rate at 10.5 percent in June from 9.5 percent previously.

StanChart adjusted its internal base lending rate from 10 to 10.5 percent resulting in an upward revision of rates to customer loans effective from this month.

“People have been tying risk-based pricing with rate increases but this is just a response to what the monetary authorities want to achieve,” Mr Ngari added.

StanChart has the lowest internal base lending rate, in contrast to Equity (14.69 percent), NCBA (13 percent) and Stanbic Bank Kenya (13.15 percent).

The repricing cycle which continues into August will see the riskiest borrowers paying more than 20 percent for bank loans.

The higher interest rates from commercial lending are expected to impact the banks’ asset quality as the rate of non-performing loans edges up further.

The bad loans which have largely been attributed to the non-payment of supplier bills by the government peaked at a high of 14.9 percent of all bank loans as of the end of May.

Mr Ngari is optimistic that the economy can turn the corner.

Read: StanChart first-quarter profit rises 46pc to Sh4 billion

“We see this as a blip. The Kenyan economy has been here for the last 60 years and will continue to be there for the next 60 years. We don’t see it as a permanent situation as we have been here before,” he noted.

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