Stanbic Bank Kenya has reported a 5.5 percent growth in net profit for the first quarter ended March when the benefits of lower costs and provisions for bad debts were eroded by a heavier tax bill.
The bank’s profit before tax had jumped 20.5 percent but a faster growth in its tax bill saw its net earnings rise by 5.5 percent to Sh3.5 billion for the three months ended March compared to Sh3.3 billion a year earlier.
The subsidiary of Stanbic Holdings Plc had tax deductions of Sh1.4 billion, nearly double the Sh751 million billed a year earlier.
The lender’s operating costs declined 7.8 percent to Sh5.02 billion owing largely to provisions for bad debts declining to Sh350.1 million from Sh855.5 million. The bank’s gross non-performing loans remained unchanged in the first three months of the year at Sh23.3 billion.
Other operating expenses of the bank shrunk 13.7 percent to Sh1.85 billion signalling to growing benefits of digital banking.
‘The growth is not big but it is a good performance considering the low interest rate environment compared to last year,’ said Shadrack Manyinsa, research analyst at Pergamon Investment Bank.
Interest rates have declined following the Central Bank of Kenya (CBK) deliberate moves to ease monetary policy through reduction of its indicative base rate.
The Central Bank Rate (CBR) is lower at 8.75 percent this year compared to 10.75 percent in the first three months of last year.
The bank’s interest income was Sh11.5 billion up from Sh11 billion despite the lower interest regime, with earnings from lending to government and other banks padding their performance.
Stanbic’s investment in government securities rose to Sh137.2 billion from Sh80.8 billion a year earlier. It lent out Sh31.7 billion to other banks resulting in interest from peers more than doubling to Sh1.85 billion.
Stanbic’s loan book expanded to Sh258.1 billion in March from Sh244 billion a year earlier but had shrunk from Sh270 billion in December.
Customer savings with the bank rose by 21.7 percent to Sh411 billion with the low interest regime allowing it to pay lower returns despite the growth in funds. The bank paid out Sh3 billion as interest for the customer deposits down from Sh3.19 billion the previous period.
Stanbic Bank is the first listed lender to release its first quarter results with analysts expecting its peers to record growth in earnings.
‘We expect the same trend of growth –of between seven percent to 12 percent– supported by a larger loan book as indicated by the growth in private sector lending and low cost of funding,’ Mr Manyinsa said of banks’ expected performance.