Unpaid loans push Stanchart to issue profit warning
The top tier lender expects at most a Sh6.7bn pro it, down from Sh9bn
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.