StanChart’s HY Net Profit Increases 50.9% at KSh3.2 bn

Shares of Standard Chartered Bank Kenya gained 0.19 per cent to 131.75 per share on the NSE on Monday after the bank's net profit grew 19 per cent to KSh2.39 Billion in the March quarter of FY21, as against KSh2.01 billion in Q1FY20.

Standard Chartered Bank Kenya on Monday reported a nearly 50 per cent growth in its net profit to KSh4.8 billion in the period ended June compared to KSh3.2 billion a year earlier.

This was attributed to lower operating expenses and higher non-interest income.

“Our first half of 2021 was one of recovery. Lockdowns, both locally and globally of various forms have come and been relaxed affecting economic activity,” Kariuki Ngari, StanChart’s chief executive, said in a statement.

“Profit before tax recovered strongly from last year, helped by strong underlying business momentum, improved loan impairments and operating cost efficiencies.”

The bank’s loan loss provisions fell 61% per cent to Ksh 638.5 million. Net interest income fell to Ksh 9.12 billion from 9.39 billion shillings.

It said its non-interest income rose 14% to 5 billion shillings.

The board did not declare a dividend for the period in line with the first-half of 2020.

Standard Chartered Reports 19% Jump In Q1 Profit At KSh2.39 Billion

Analyst Commentary

Given the bank’s conservative risk management strategy, the NPL ratio is expected to gradually ease off from its elevated levels.

We also anticipate that dividend payment will revert to pre-pandemic amounts on the back of improved earnings (which was halved to Ksh10.50 in FY20).

Its wealth management business contributed 21.0% of revenue with assets under management (AUM) growing 90.0% y/y to KES 129.0Bn as of FY20.

The Bank may look into issuing loans backed by customers’ investments in mutual funds given the impressive increase in AUM.

Stanchart is also seeking to venture into digital micro lending, credit card automation and digitization of its Commercial Banking segment.

With the bank’s continued focus on digitalization as well as long term cost-cutting initiatives, we expect that the Cost to income ratio will continue on a downward trend.

We maintain our BUY recommendation on SCBK at a fair value estimate of KES 167.20.

Genghis Capital