Un­paid loans push Stan­chart to is­sue profit warn­ing

The top tier lender ex­pects at most a Sh6.7bn pro it, down from Sh9bn

Business Daily (Kenya) - - TOP NEWS - Con­stant Munda cmunda@ke.na­tion­media.com

Stan­dard Char­tered Bank Kenya (Stan­chart) has is­sued a profit warn­ing for the full year end­ing De­cem­ber, pulled down by ef­fects a cap on lend­ing rates im­posed a year ago and un­paid loans in slow­ing econ­omy.

The bank’s net profit in the nine months ended Septem­ber dropped 38 per cent to Sh4.7 bil­lion—mak­ing it big­gest drop among top lenders that have an­nounced their quar­ter three re­sults.

“SCBKL projects that net earn­ings for the year end­ing De­cem­ber will be po­ten­tially 25 per cent lower than that re­ported for the year that ended De­cem­ber 2016, pri­mar­ily due to two fac­tors,” Stan­chart chief ex­ec­u­tive Lamin Man­jang said in a state­ment.

The two fac­tors are bad debts and the le­gal caps on lend­ing.

This means that the lender ex­pects a max­i­mum net profit of Sh6.75 bil­lion this year com­pared to Sh9 bil­lion it posted last year, re­flect­ing a dip of at least 25 per cent.

The bank also cut div­i­dend pay­out for the pe­riod to Sh4.50 from Sh6 it paid in the same pe­riod last year.

Mr Man­jang say the caps have slowed credit growth.

The gov­ern­ment capped lend­ing rates at four per­cent­age points above the cen­tral bank’s bench­mark rate, which stands at 10 per cent, and put a min­i­mum de­posit in­ter­est rate of 70 per cent of the bench­mark.

This saw Stan­dard Char­tered earn­ings from loans drop to Sh10 bil­lion, down from the Sh11.4 bil­lion it posted in a sim­i­lar pe­riod a year ear­lier.

The bank re­duced its profits by Sh3.7 bil­lion in the nine months com­pared to Sh1.8 bil­lion in sim­i­lar pe­riod last year to cover risks as­so­ci­ated with the un­paid loans that stood at Sh16.9 bil­lion.

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