Standard Chartered Bank Kenya has reported a 13.5 percent drop in profit after tax for the three months ended March, owing to a shrink in its loan book and decline in forex income.
The bank reported a net profit of Sh4.8 billion down from Sh5.6 billion over a similar period last year, as its core business took a hit.
StanChart’s loan book shrank to Sh137.8 billion from Sh153.5 billion a year earlier, resulting in a 12.6 percent drop in interest income to Sh5 billion. Lending to the private sector has contracted with tough economic conditions, forcing businesses and households to shelve borrowing plans despite a fall in interest rates.
“Standard Chartered has recorded a decline across most metrics in quarter one –a trend that is likely to continue into the full year,” said Sterling Capital.
“The bank is unlikely to focus on growing its loan book given risks associated with poor asset quality across the banking industry,” added analysts at Sterling Capital.
Banks have turned to buying government securities whose appetite for debt has been high.
StanChart’s holding of government securities rose to Sh93.9 billion in March this year, up from Sh55.2 billion in the same period last year. Interest earned from government bonds and bills shot 69 percent to Sh3.4 billion.
StanChart’s earnings from forex trading more than halved to Sh1 billion from Sh2.5 billion with a stable shilling closing opportunity margins.
Analysts said they expect the bank to be more active in bond trading in a bid to have earnings from government securities cover the drop in forex trading.
Customer deposits held with the bank fell to Sh285.2 billion from Sh306 billion in March last year. Interest paid out to customers dropped six percent to Sh1.02 billion.
The reduction in loan book and deposit base has accelerated in the last three months, with credit advances shrinking by Sh13.8 billion in the three months from December and saving down by Sh10.4 billion.
StanChart lending to other bankers in the quarter to March shot up from Sh10 billion to Sh10.5 billion, an indication of the bank's effort to take advantage of its high liquidity. The lender kept a tight lid on its expenses with its staff cost, rental charges and other operating expenses declining.
Staff cost dropped 7.6 percent to Sh2.1 billion which follows a cut in employees by 37 persons in the year ended 2024.
“With declines across both non funded income and net interest income, the bank can only focus on managing their cost base, to reduce the level of decline to be expected in year 2025,” said Sterling Capital.
Digitisation has allowed the bank to cut back on staff numbers, use of paper and reliance on brick and mortar branches. Rental charges dropped 22.7 per cent to Sh75 million reflecting the impact of digitisation.
