Standard Chartered Bank Kenya Ltd (SCBK), a UK-based conglomerate, maintained its pole position as top corporate lender in the local market, reporting a pre-tax profit of Sh14.3 billion.
The earnings were realised during the financial year ended December 31, 2014 compared to Sh13.3 billion recorded in the previous period.
The improved performance, however, is against a huge portfolio of non-performing loans and advances, which grew sharply from Sh3.8 billion in 2013 to Sh10.8 billion last year. SCBK has therefore been forced to increase its provisions for loan loss from Sh1.5 billion to Sh4.1 billion. ”2014 was a challenging year due to increased non-performing loans but we maintained our path of sustained growth.
It was also the year we re-organised our business repositioning for the future,” explained Lamin Manjang, Managing Director and Chief Executive Officer SCBK Ltd. “Overall, we remain disciplined in our approach to risk management and proactive in our collection efforts to minimise account delinquencies.
While we do not see a broad-based deterioration in asset quality, the number of clients subject to additional, precautionary monitoring remains elevated reflecting our proactive approach to managing risks in an uncertain environment.”
Its closest rival Barclays Bank of Kenya recorded a pre-tax profit of Sh12.3 billion for the year ended December 31st, 2014 compared to Sh11 billion recorded the previous year.
SCBK’s key profit drivers include non-interest income, which increased by 16 per cent, up from Sh7.1 billion to Sh8.2 billion recorded during the year under review.
This good earnings are largely due to sale of a property during the year. On an underlying basis, however, non-interest income fell by six per cent, which was attributed to a sharp decline in foreign exchange income.
Income from foreign exchange trading decreased by 11 per cent to Sh2 billion, as a result of a low rates and low currency volatility environment coupled with margin compression, which offset effects of significant volume growth.
“This improvement in profitability can be attributed partly to the sale on a non-current asset, which took place in the first half of 2014 as well as a lower tax charge,” said Faith Mwangi- an investment analyst at Standard Investment Bank (SIB) Ltd.
The bank’s net bad debt charge rose from Sh987 million to Sh1.3 billion, driven by a small number of accounts. Stanchart says it will continue to have a proactive approach to risk management and remain watchful. Loans and advances declined by six per cent to Sh122.7 billion compared to Sh129 billion in 2013, while customer deposits declined marginally to Sh154.1 billion, down from Sh154.7 billion recorded in 2013.
“Going forward, we will see banks moving more to non-interest revenue through use of alternative delivery channels. This is due to a fall in interest rates and increasing cost of deposits,” said Ms Mwangi.