KENYA – Stanbic Bank Kenya, a financial services organization, has announced a 37 per cent decline in its half year earnings to KSh2.6 billion (US$24m) down from KSh4.1 billion (US$37.85m) last year.

The sharp decline in earnings is attributable to a decline in operating income along with higher provisioning on expected credit losses from customer defaults.

The lender’s net operating income in the period fell by 11.7 per cent to KSh11.3 billion (US$104.32m) from KSh12.8 billion (US$118.17m) from a shrink in both interest income and non-interest funded income (NFI).

Net interest income earned in the period has eased to KSh6.3 billion (US$58.16m) from KSh6.7 billion (US$61.85m) while NFI has declined to a flat KSh5 billion (US$46.16m) from KSh6.1 billion (US$56.32m).

The decline in operating income in spite of a balance sheet expansion with issued loans and customer deposits growing by 32.7 and 20.6 per cent to KSh235.1 billion (US$2.17bn) and KSh287 billion (US$2.65bn) respectively.

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.

The lender has increased its provisioning for expected credit losses from loan defaults to KSh1.7 billion (US$15.69m) from KSh917.4 million (US$8.47m) last year with its stock of gross non-performing loans (NPLs) soaring by 18.4 per cent to KSh21.2 billion (US$195.72m).

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 bank hopes to change its fortune in the second half of year guided in part by its continued digitization efforts which have continued shedding part of its 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.

Stanbic Bank will not pay out an interim dividend from its half year earnings with its earnings per share (EPS) having declined to KSh6.46 (US$0.06) from KSh10.28 (US$0.095) in a similar period in 2019.

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