Strong dollar boosts banks' profits

Dollars in a counting machine. [iStockphoto]

Banks reaped big from the dollar shortage with most lenders recording impressive growth in foreign exchange trading income in the first six months of this year. 

This has helped banks that have so far released their financials maintain their profitability that started with the ease of the containment measures against the Covid-19 pandemic.

Standard Chartered Bank’s net profit in the first half of 2022 grew by 20.3 per cent to Sh5.4 billion, owing to a reduction in its loan loss provision and growth in foreign exchange trading income.

In the same period last year, the publicly listed lender recorded a profit after tax of Sh4.9 billion as banks began to recover from the effects of the Covid-19 pandemic.

“We have delivered a strong set of results for the first half of the year with income up 10 per cent. We’ve seen healthy business momentum driving top-line growth with double-digit growth in net interest income and strong performance in wealth management and financial markets products,” said Kariuki Ngari, the chief executive of Standard Chartered Bank of Kenya.

Tier one lender Stanbic Bank posted a profit of Sh4.8 billion in the first half of 2022, an increase of 41.2 per cent compared to Sh3.4 billion in the same period last year.

The growth was boosted by the lender’s trade in foreign currency at a time when the economy has been starved of the US dollar leading to a spike in its price in the foreign exchange market.

Stanbic, which is listed at the Nairobi Securities Exchange (NSE) made Sh4.17 billion by trading in foreign currencies, an increase of 46.3 per cent from Sh2.85 billion in the first six months of 2021.

Income from loans and advances grew by slightly over a fifth to Sh8.66 billion in the period under review compared to Sh7.1 billion last year, as several sectors of the economy began to shrug off the negative effects of the Covid-19 pandemic.  

In total, the lender’s interest income stood at Sh11.2 billion in the review period compared to Sh9.8 billion in the first half of last year.

I&M Bank, another tier one lender, saw its profit after tax grew by 14 per cent to Sh4.9 billion, buoyed by interest income and foreign currency trade income. In the same period last year, the lender's profit after tax stood at Sh4.9 billion. 

I&M’s total interest income grew from Sh14.6 billion to Sh17.5 billion, with a big chunk of the earnings coming from loans and advances.

Interest on loans and advances grew by 15.4 billion to hit Sh12 billion. In the first half of 2021, interest from loans and advances stood at Sh10.4 billion.

Just like Stanbic and Standard Chartered, I&M also grew its foreign exchange trading income, more than doubling it from Sh770 million to Sh1.9 billion in the review period.

But the bank’s profit was also slashed by growth in its tax liability from Sh1.6 billion to Sh2.3 billion.

Standard Chartered Bank made a net profit of Sh5.15 billion in the first six months of the year. 

Banks have continued to report high profits amidst a tough economic environment occasioned by the pandemic, drought, the Russia-Ukraine conflict and election jitters.

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