Stanbic Holdings #ticker:SBIC has reported a 18.6 per cent drop in its full-year to December 2020 net profit on subdued interest income and higher loan provisions as Covid-19 pandemic hit the economy.
The Nairobi Securities Exchange-listed lender made Sh5.19 billion last year down from Sh6.38 billion recorded in 2019.
The profit of Stanbic Bank and its investment arm, SBG Securities, both declined by 19 per cent and 71 per cent respectively pulling down the group’s performance.
Higher loan provisioning across the banking industry ate into the lenders’ profitability as bad loans and cost took a sharp rise in an economy that was battered by the pandemic-related woes.
Six of the 11 listed banks have already notified shareholders they will be reporting substantially lower profits and are therefore unlikely to be paying dividends for the year.
Stanbic increased loan provisioning by 64.7 per cent to Sh4.3 billion in the wake of the virus crisis that saw massive layoffs, pay cuts and companies’ declined revenues, hurting borrowers’ ability to repay.
“The Group increased its provisioning to reflect the worsening credit risk on the back of layoffs and liquidity constraints on businesses caused by the pandemic,” said Stanbic Kenya CEO Charles Mudiwa on Friday.
Stanbic restructured loans worth Sh40 billion during the year for over 7,200 individuals and businesses.
Net interest income dropped by 4.1 per cent to Sh12.8 billion, while non-interest income declined by 8.7 per cent to Sh10.4 billion.
The lender attributed this to the Sh283 million foregone as fee revenue following Central Bank of Kenya’s order to zero-rate transfers between banks and mobile wallets, as well as reduced interest rates in line with falling indicating rates.
Stanbic was able to maintain an adequate liquidity of 56.4 per cent above the banking sector’s liquidity which climbed to 54.55 per cent by the end of December.
“The Group maintained a strong balance sheet growth as evidenced by a 12 per cent increase in customer deposits and four per cent growth in customer loans and advances,” Mr Mudiwa said.
The lender will pay Sh1.5 billion in final dividend, representing Sh3.80 per share, a drop from Sh2.79 billion paid out in 2019.
The lender hopes to diversify revenue streams to register growth.
“In a fast-changing world, we recognise the need to adapt to evolving risks, optimise resource allocation and drive returns. In doing so, we will leverage our core strengths, while seeking new ways to expand our offering and diversify our revenue streams further,” Mr Mudiwa said.