Central Bank of Kenya’s tough new rules see banks revise their financial statements

Requirements by the Central Bank of Kenya (CBK) have seen banks continue to publish different financial statements, leaving investors with two sets of results.

Standard Chartered Bank of Kenya (StanChart), which released its results in March in line with the publishing requirements for the sector, yesterday published in the press a new set of financial statements that had were different from what had been forwarded to investors at the Nairobi Securities Exchange last month.

For instance, the statement sent to the NSE on March 23 had indicated that the bank’s net interest income for the year ending December 2015 was Sh18.116 billion. This was a slight increase from Sh17.9 billion in 2014.

New figure

But in the latest statements, the bank placed its net interest income for the year ended December 2015 at Sh17.6 billion compared to Sh17.3 billion reported in 2014, to reflect an increase of Sh300 million.

The new figure is Sh483 million less than what was reported earlier. It had the effect of changing the operating income of the bank, from the Sh25.1 billion earlier reported to Sh24.8 billion after the adjustment. Most of the other details remain the same, including the balance sheet.

StanChart explained that the difference in reporting was to comply with the templates given by the regulator.
“The results published in March 2016 comply with the templates and reporting requirements prescribed by CBK. There are minor differences between CBK requirements and the final published accounts as these have to comply with IFRS requirements. It leads to minor differences across lines but overall the profit number is unaffected,” the bank said in an email interview with The Standard.

The top tier bank reported a 40 per cent drop in full-year net profit to Sh6.3 billion, down from the Sh10.4 billion it had reported in a similar period in 2014. The drop was partly attributed to a spike in non-performing loans, which rose from a net of Sh4.7 billion in 2014 to Sh6.7 billion last year.

StanChart will be asking its shareholders to approve a resolution to create an additional 18.5 million ordinary shares of Sh5 each at its upcoming Annual General Meeting.

The CBK has introduced new requirements for lenders, especially in terms of provisions for bad loans, a move that has pushed some to book heavy losses.

The new measures saw National Bank report a Sh1.2 billion loss, its biggest loss in eight years for the year ended December 2015 after it was forced to make a Sh3.7 billion provision for non-performing loans. The provision, which was contested by the bank’s credit team, was Sh2.7 billion more than what the lender had set aside.

Chase Bank, which reopens today, was also forced to restate its financials after it disagreed with its auditors the treatment of some of its debts, a move that a run on the bank after the news reached its customers.