Stanbic Bank Kenya on Friday posted a Ksh2.6 billion half-year profit, a 37% reduction from the Ksh4.1 billion it reported at a similar period last year on higher loans provisioning with the lender expecting defaults aplenty due to the current economic climate.
The bank’s net operating income in the period fell by 11.7 percent to Ksh.11.3 billion from Ksh.12.8 billion from a decline in both interest income and non-interest income.
Loans and customer deposits grew by 32.7 and 20.6 per cent to Ksh.235.1 billion and Ksh.287 billion respectively.
Net interest income shrunk to Ksh.6.3 billion from Ksh.6.7 billion while non-interest income declined to Ksh.5 billion from Ksh.6.1 billion.
Stanbic Bank Chief Finance Officer Abraham Ongenge attributed the decline in income to falling interest rates from a reduction in yields from investments in government paper.
“While we’ve seen growth in the balance sheet, interest income has s******d from interest rates coming down almost resetting the price we charge on our balance sheet,” he said.
The bank has increased its provisioning for expected credit losses from loan defaults to Ksh.1.7 billion from Ksh.917.4 million last year.
Stanbic just like all other banks is struggling with a high volume of Non Performing Loans (NPLs) which increased by 18.4 percent to Ksh.21.2 billion.
With intervention from the Central Bank of Kenya(CBK) prevailing upon lenders to restructure loans for customers adversely affected by the COVID-19 p******c, the bank moved to ensure higher provisioning for bad loans.
“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.
Meanwhile, the lender projects that its digitization efforts will enable it to weather the COVID-19 p******c and to cut down on operational costs.
“We’ve found ourselves being stretched but we’ve remained clear in our strategy of client focus and digitization. We’ve effectively accelerated our digital journey and are now onboarding more customers on our digital channels.” said Stanbic Bank Kenya CEO Charles Mudiwa.
The lender will not be paying out interim dividends to its shareholders after seeing its earnings per share (EPS) decline to Ksh.6.46 from Ksh.10.28 last year.