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StanChart Q1 profit drops on account of new financial reporting standard

Standard Chartered Bank Kenya Chief Executive Lamin Manjang says the period also saw an increase in the cost of investing in its digital strategy/FILE

NAIROBI, Kenya, May 29 – Standard Chartered Bank has reported a profit of Sh1.6 billion for the first three months of 2018 compared to Sh1.9 billion in the first quarter of 2017.

The bank has attributed the drop in profit to the International Financial Reporting Standard nine (IFRS 9) that came into effect in January this year resulting in an upward adjustment in loan impairment by 38 percent to Sh1.1 billion.

Standard Chartered Bank Kenya Chief Executive Lamin Manjang says the period also saw an increase in the cost of investing in its digital strategy.

“Total operating income is up year-on-year. However pre-tax profit is down 7.7 percent primarily due to higher costs from increased investment in our “Digital by Design” strategy and loan impairment which is now on an IFRS 9 basis,” said Manjang.

Operating expenses grew by 9.6 percent to Sh3.3 billion largely due to the implementation of the Digital strategy which aims to migrate over 80 percent of transactions to non-branch channels by 2020.

Net interest income, however, increased by 4.5 percent to Sh4.8 billion from Sh4.6 billion in the first quarter of 2017 while interest income from customer loans advanced declined 6 percent to Sh3.4 billion.

Total interest expense increased by 16.4 percent from Sh1.7 billion in first quarter 2017 to Sh2.0 billion as a result of higher deposit balances.

Loans and advances to customers declined by 9.9 percent to stand at Sh113.8 billion compared to Sh126.3 billion at the close of 2017.

“We remain selective in asset origination as we work to grow our balance sheet in a safe and sustainable manner,” added Manjang.

Customer deposits increased by 8.7 percent to reach Sh232 billion compared to Sh213 billion at the end of 2017 from deepening existing client relationships and new mandates.

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Non-interest income increased 6.5 percent year-on-year to Sh2.3 billion on the back of increased focus on non-funded income to diversify income streams.

Operating expenses grew by 9.6 percent to Sh3.3 billion largely due to the implementation of the “Digital by Design” strategy which aims to migrate over 80 percent of transactions to non-branch channels by 2020.

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