CfC Stanbic Holdings half-year profit up 22pc to Sh2.4b

CfC Stanbic Holdings’ earnings from operating activities increased more than four times to push the group’s half-year net profit by 22 per cent to Sh2.4 billion.

Financial statements prepared for the six months to June 31 show the group’s net interest income grew by 24 per cent to Sh5.5 billion. This was supported by increased returns from loans and advances, and Government securities.

In the process, total income moved to Sh9.4 billion from last year’s Sh7.7 billion.

CfC Stanbic Bank, which is set to drop the CfC prefix, contributed the bulk of the profit (Sh2.36 billion). CfC Insurance Agency contributed Sh28 million, while the group’s investment bank, SBG Securities, accounted for Sh2.4 million.

“The revenue was partly offset by a decline in SBG Securities due to decreased activity at the Nairobi Securities Exchange,” said the bank’s CEO Philip Odera at an investor briefing yesterday.

The bank followed the industry trend that began in December by making a huge loan loss provision of Sh874 million, being more than three times the provision that was made in June last year. This moved the group’s impairment charges up 21.9 per cent to Sh9.4 billion, with Chief Finance Officer Abraham Ongenge saying the bank provided more to reflect the realities of the market.

“We have taken as much a prudent view on our customers as possible. Customers may be meeting obligations, but due to heightened risks that in future they may have challenges of servicing, we lowered the credit grade,” he said.

The bank’s gross non-performing loans (NPLs) had risen by more than half to Sh5.9 billion by close of books in June.

While commenting on the debate on capping interest rates, Mr Odera said while high rates may be triggering high NPLs, capping is not the cure.

“High interest rates somehow contribute to high NPLs. High NPLs are neither productive to banks nor customers, but our view is that capping is not appropriate. It will not be commensurate with the risk we are taking,” he said.

He added that he expects minimal impact should President Uhuru Kenyatta move to assent to the law since the group has diversified its income sources. Current results show that 42 per cent of its income came from interest income.

The high provisioning saw operating expenses rise to Sh4.9 billion from Sh4.6 billion during a similar period last year. However, the bank’s cost to income ratio, which measures the efficiency of firms, improved to 52 per cent from 60 per cent.