Standard Chartered issues profit warning as Q3 profit drops 38pc
Standard Chartered Bank Kenya has issued a profit warning for its full year performance attributing it to a rise in nonperforming loans.
The profit warning comes as the tier 1 lender announced a 38 percent drop in third quarter profit to Sh4.7 billion down from Sh7.7 billion on account of rising loan defaults.
During the period, Standard Chartered’s loan impairments grew by 105 per cent year-on-year to Sh3.7 billion with gross non-performing loans increasing to Sh17.0 billion.
“We have further seen an increase in our non-performing loan book due to a limited number of accounts downgraded in the period. The cover ratio remains high at 81 percent,” Standard Chartered chief executive officer Lamin Mnjang said.
Mr Manjang added that the introduction of the interest rate cap had also negatively affected the business, with borrowers locked out leading to a near stagnation in credit growth.
During the period under review, the bank’s loan book shrunk by seven percent from Sh123 billion to Sh114 billion.
This saw net interest income also decline by eight percent to Sh13.8 billion.
Customer deposits increased by 27 percent to reach Sh238 billion compared to Sh187 billion last year.
Listed companies are required to issue a profit warning if they project that full year earnings will drop by more than 25 percent.
With the profit warning, Standard Chartered Bank could see its full year profit drop below Sh6.7 billion after posting a Sh9 billion profit in 2016.
“The effects of the Banking (Amendment) Act 2016 which capped lending rates and introduced a floor on deposit rates coupled with a slowdown in economic activity during the year which, together have contributed to a deceleration in credit growth,” Mr Manjang said.
The bank is in the process of implementing a loan recovery strategy as it seeks to cover its bad loan exposure.
“The bank has taken assertive efforts to manage non performing loans including working very closely with our clients to support their turnaround efforts,” he said.
For Citizen TV updates
Join @citizentvke Telegram channel
Video Of The Day: | BULLDOZERS FOR SANITIZERS | Families remain in the cold after evictions from Kariobangi sewage estate