By: Shadrack Wanyama @MountKenyaTimes
Stanbic Holdings (PLC) has announced a 37 per cent decline in its half year earnings to Ksh.2.6 billion down from Ksh.4.1 billion last year.
In a virtual release of the financial results, the lender attributed sharp decline in earnings to a decline in operating income along with higher provisioning on expected credit losses from customer defaults.
The firm’s gross earnings dropped by over Sh1 billion to hit Sh4.04 billion compared to Sh5.4 billion in June last year.
Nonetheless, the lender maintained strong balance sheet growth as evidenced by a 27 % increase in customer deposits partly offset by a 6 % decline in net interest income arising from margin compression on the back of government monetary action to cut interest rates to stimulate lending in the private sector.
The lender has increased its provisioning for expected credit losses from loan defaults to Ksh.1.7 billion from Ksh.917.4 million last year with its stock of gross non-performing loans (NPLs) soaring by 18.4 per cent to Ksh.21.2 billion.
The additional provisions have been forced upon by changing customer profiles as the clients are weighed down by the economic impact of the COVID-19 pandemic.
“This environment is probably one you see once every one hundred years. It has become important to take a long-term view of our customers and put an adequate level of provisioning. The uncertain environment has required us to take an initial pain in terms of our NPLs perspective,” added Ongenge.
The lender saw a significant reduction in operating expenses to Sh5.2 billion representing a reduction of 15 per cent from the same period last year. This was due to proactive measures taken to re- prioritize expenditure to cushion against the impact of Covid-19.
Stanbic Bank Chief Finance Officer Abraham Ongenge has attributed the decline in income to falling interest rates from a slash on both the Central Bank Rate (CBR) and yields from Treasury investments.
“While we’ve seen growth in the balance sheet, interest income has suffered from interest rates coming down almost resetting the price we charge on our balance sheet,” he said.
Stanbic Kenya CEO Charles Mudiwa said the lender continues to support its clients by offering fee waivers on digital channel transactions in compliance with the Central Bank of Kenya directive. This partly impacted the fees and commission revenue reported in the first half of 2020.
He is optimistic that the reopening of the economy after strict Covid-19 containment measures will have a positive effect on the bank’s book in the coming days.
‘’We are starting to see positive growth in the economy following the ease of the lockdown, hence the next six months will be crucial to ensure we defend earnings and register growth. We are refocusing our efforts on digital innovation to further exploit new opportunities,‘’Mudiwa said.
Stanbic become third listed bank to record a decline in its profits after KCB and Cooperative bank earlier this week