StanChart Kenya to cut bad debts below 5pc in 2015

Standard Chartered Bank of Kenya aims to bring bad debts down to below 5 per cent of its loan book by the end of this year from 7 per cent in the first quarter, its chief executive has said.

Bad debts at the Kenyan division of Standard Chartered Plc jumped to 11 per cent of lending in 2014 after it started treating loans that had not been repaid for three months as bad, rather than six months previously.

Reducing the level to below 5 per cent would bring the bank in line with the Kenyan industry average. Total bank bad debts stood at 5.6 per cent of loans in December, up from 5.2 per cent in 2013, Central Bank figures showed.

“We expect to bring it down to below 5 per cent by the end of the year through aggressive recovery efforts and also making sure the existing book is well managed,” Standard Chartered Kenya Chief Executive Lamin Majang said.

Loan impairment charges soared 249 per cent to Sh864 million in the first quarter of this year, cutting pretax profit by close to a third. Several local companies were among borrowers whose debts were classed as distressed after Standard Chartered changed its definition of bad debt.

Bankers say Central Bank has been pressing lenders for more action to cut bad debts. But Majang said Standard Chartered changed its definition based on an internal review, adding the bank’s custody business was picking up after a 75 per cent drop in inflows from foreign investors in January, when the Government imposed a new capital gains tax.