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StanChart new business model grows profits by 45pc

The Retail Banking segment which contributed 46 per cent to total income posted strong performance driven by growth in mortgages and lending to small businesses. Year-on-year income was up 14 per cent.

NAIROBI, Kenya, 22 Mar – Standard Chartered Bank Kenya Ltd has announced a profit before tax of Sh13.3 billion for the year ended 2016. 

The Bank attributed the 45 per cent year-on-year growth to increased income coupled with lower loan impairments, but warned that regulatory controls have since posed significant headwinds in the financial sector.

Mr Lamin Manjang, CEO Standard Chartered said the refreshed business strategy that was launched in late 2015 which largely focused on increased investment in digital technology had enabled the Bank to control costs, manage risk and exploit new business opportunities.

“We made substantial changes in the business to address the underlying challenges that impacted our earnings in 2015,” he said.

“The performance in 2016 was strong reflecting the good progress we have made on the strategic actions we set out in late 2015. Our underlying business volumes are strong, we continue rebuilding the balance sheet with good quality assets and our capital position remains strong.”

The Retail Banking segment which contributed 46 per cent to total income posted strong performance driven by growth in mortgages and lending to small businesses. Year-on-year income was up 14 per cent.

The Corporate & Institutional Banking segment revenue was up 39 per cent benefiting from growth in foreign exchange and client income. This segment contributed 31 per cent to total income.

Income from Commercial Banking was down 36 per cent year-on-year impacted by decreased loan volumes. This segment contributed 9 per cent to total income.

Central and other items, which mainly include treasury activities and Corporate Centre costs, remained broadly flat reflecting lower interest rates. This contributed 14 per cent to total income.

The Bank’s underlying costs grew 11 per cent and reflect investment in digital capabilities, continued branch network optimisation, and changes undertaken around staff including reorganisation in line with the new strategy.

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Loan impairment is down 55 per cent year-on-year reflecting the benefit of past risk management actions and the Bank’s tightened risk tolerances. Credit quality was broadly stable with gross non-performing loans increasing marginally to KShs 15 billion. The cover ratio increased to 69 per cent

Mr Manjang, however noted that the growth trajectory was impacted in the fourth quarter following the implementation of the Banking (Amendment) Act, 2016.

“The full effect of the legislation is expected to be felt across the industry in 2017. At the moment we are witnessing a significant deceleration in credit growth,” he said.

Customer loans and advances increased by seven per cent as the Bank continues to focus on disciplined balance sheet management and more selective asset origination.

“We have a balance sheet that gives us a strong foundation to support our growth ambitions for the future. Our balance sheet is highly liquid with advances to deposits ratio at 66 per cent. We remain a customer deposit funded bank with the Current Account and Savings Account, CASA, balances at 71 per cent (2015: 76 per cent). We are confident that the initiatives that we have put in place across our business will see our balance sheet grow strongly,” he said.

To mitigate against the anticipated slow down in the sector, Mr Manjang said the Bank will continue to invest in digital technology to enhance operational efficiency.

The Board has resolved to recommend the payment of a final dividend for the year of  Shs14.00 for every ordinary share of Sh5.00.

This, in addition to the interim dividend paid in August 2016 of Sh6.00 for every ordinary share of Sh5.00, brings the total dividend to KShs 20.00. This compares to a total dividend of KShs 17.00 per ordinary share paid in 2015.

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