The banking sector in Kenya is recording a significant growth in profitability as the level of non performing loans is felling while the number of customers' increasing significantly, the chairman of Standard chartered Bank, Mr Wilfred Kiboro has said.
This is driven by the growth in customer deposits, loans and advances, and injection of capital that is sustaining credit quality within the industry to remain robust.
The Standard Charted Bank registered a profit of Sh 7.7 billion before taxation in 2010 compared with Sh 6.7 billion in 2009, said the chairman of the bank, Mr Wilfred Kiboro during this year annual general meeting.
Kiboro attributed the “strong performance” to Kenya's economic growth by 4.9 percent in 2010 fueled by anew constitution, telecommunication boom, sound microeconomics management, regional integration, and investment in infrastructure.
The bank recorded a decline in non performing loans which stood at 2.0 percent compared to 2.5 percent in 2009, he said this remains the lowest in the banking sector in Kenya as all the sectors experienced a balanced growth in the country in 2010.
Customer depots increased by 16 percent to Sh 60.3 billion as the earning per share increased as well by 13 percent from Sh 16.78 to Sh 18.58 percent ordinary share.
The bank anchored this on accumulative monetary policy and favorable weather which supported economic expansion with agriculture, tourism, electricity and water, cement, and financial services posting increased growth.
Additionally, increased consumer confidence coupled with credit expansion boosted the manufacturing sector while fuel driven inflation slowed the transport and communication sector, he said.
The bank's operating cost increased by 17 percent to Sh 6 billion as the bank continued to invest in new business capability. To mitigate this increase “we rolled out the agency banking model aimed at lowering the cost of services delivery while expanding the banks' reach,” Kiboro said as “we launched currency centers in Nyeri, Nakuru and Meru in order to lower risk and reduce cost of transporting cost to Nairobi.”
The bank has introduced credit information sharing to promote competitive risk based pricing of credit facilities and development of information capital for borrowers who may not have physical collateral.
However, political uncertainty, especially with regard to the governing coalition, high cost of fuel and other inputs will continue to put the economy under enormous strain and slowdown economic recovery, the managing director and chief executive officer of the bank, Mr Richard Etemesi said.
Etemesi said a conducive environment is a must for business to blossom in the country. Nevertheless, he said the business levels have increased due to improved economic conditions as well as the transformation activities targeting small and medium enterprises (SME) business.
The bank gives local corporates and SME support as they grow and trade by offering commodity, interest rate and currency hedging for them to manage both investment and trade risks in an increasingly global economy.
“One of the major investment in 2010 was the purchase of the custody services business from Barclays Bank of Kenya,” the CEO said, adding that the purchase involved the transfer of assets under custody of transferring clients.
The acquisition of the custody has given Standard Chartered Bank new products to offer to clients domestically; sustainable annuity income from the clients that transferred from Barclays Bank of Kenya Limited; a new source of deposit liquidity; and an opportunity to build relationship with regional and international investors to invest in Kenya.
The bank is standardizing platforms and re-engineering processes to drive down both technology and operating costs by reducing unit transaction costs and markedly reducing service failures thus improving efficiency and have more headroom for investment while simultaneously enhancing control and resilience.
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