StanChart earnings up on negative loan provisions

By JAMES ANYANZWA

Standard Chartered Bank Kenya boosted its earnings in the first quarter of 2022 by booking a negative provision for loan losses with hopes of an economic turnaround from the adverse effects of the Covid-19 pandemic.

The lender, which is listed on the Nairobi Securities Exchange (NSE), booked a negative loan loss provision of Ksh86 million ($741,379.31) leading to a 15.48 percent growth in net profit to Ksh2.76 billion ($23.79 million) from Ksh2.39 billion ($20.6 million) in 2020.

“Our first quarter performance was strong despite volatile and challenging market conditions. The start to 2022 has been strong. However, we continue to remain alert to the challenging external environment which has been elevated by Russian invasion of Ukraine, continuing cases of Covid-19 in China which is leading to logistical shipping challenges thus causing accelerated inflation globally,” chief executive Kariuki Ngari said last week.

Several lenders built massive loan loss reserves during the Covid-19 pandemic in 2020 leading to a fall in profit. But it is emerging that the banks are now seeing enough positivity to reduce some of these reserves through negative provisioning, creating room for earnings growth.

According to StanChart’s unaudited financial statements released last week, the lender total operating income for the three months to March 31 increased by 4.7 percent to Ksh7.4 billion ($63.79 million) from Ksh7.07 billion ($60.94 million).

Growth

Its net interest income increased by 7.2 percent to Ksh4.92 billion ($42.41 million) from Ksh4.59 billion ($39.56 million) while non-funded income remained relatively flat at Ksh2.48 billion ($21.37 million). Total operating expenses declined 5.43 percent to Ksh3.48 billion ($30 million) from Ksh3.68 billion ($31.72 million), with loan loss provisions declining to negative Ksh86 million ($741,379.31) from a high of Ksh413.21 million ($3.56 million) in the same period last year.

Net loans and advances to customers increased 8.67 percent to Ksh128.09 billion ($1.1 billion) from Ksh117.87 billion ($1.01 billion) while customer deposits stood at Ksh265.38 billion ($2.287 billion).

In April, the London-listed StanChart Plc announced it would sell its operations in five African countries in a strategic review aimed at disposing less profitable subsidiaries and simplifying the group business.

This will leave it with the Kenyan and Nigerian subsidiaries as its most important units in the continent besides operating in Tanzania, Botswana, Mauritius, Uganda, Zambia, Cote d’Ivoire, Egypt and Ghana.

Barclays Plc in 2016 announced plans to exit the African market by selling off its entire 62.3 percent shareholding in Barclays Africa Group or reducing it to a non-controlling interest over a two to three-year period. UK’s financial conglomerate Atlas Mara Ltd, is also at the tail end of exiting the continent terming its African investments “risky” and the sub-Saharan African macroeconomic environment “challenging”.