As profit dips, StanChart warns of tougher times

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By Jackson Okoth

Standard Chartered Bank Kenya suffered a four per cent drop in pre-tax profit, as investments in automated banking, new headquarters and staff pushed up costs.

The bank’s Chief Executive, Richard Etemesi said the investments were necessary t0o guard against the full impact of the global credit crisis, that will eventually hit Kenya.

Standard Chartered’s pre tax profit fell to Sh4.7 billion last year, from Sh4.9 billion in 2007. It became the first of the big five banks to suffer a dip in profit.

The other main players are Barclays Bank, KCB, Equity Bank and National Bank of Kenya. Its share price fell by 10 cents yesterday, as the stock market reacted to news of the drop in annual earnings.

It joins five other listed firms, Bamburi, East African Portland, KenGen, Kenya Power and Lighting Company and Mumias Sugar, who have been hit by either rising costs, or weaker consumer demand.

“An investment of Sh3.5 billion on ATMs, branch expansion, construction of our head office and hiring of more staff contributed to an increase in overheads,” the bank’s Chief Executive Richard Etemesi told an investor briefing yesterday.

StanChart Kenya also suffered a revenue loss of Sh253 million, as a result of the parent firm selling off its stake in Visa International, the previous year. Etemesi noted that the bank’s huge investment in infrastructure is a long-term strategy, that will pay off in the future as the full impact of a global recession hits the local economy.

“Our liquidity position of 56 per cent is strong, giving the bank enough headroom to grow its loan books,” explained Etemesi. With one of the largest loan books in the industry, at Sh43.3 billion, the highly liquid SCB has instead adopted a conservative lending approach, with its business model designed for the middle-class consumer segment. This approach tends to target individuals with a minimum income of Sh20,000 per month.”We have want a balanced portfolio strategy, with both consumer and wholesale segments contributing equally to the bottom line,” said Etemesi.

The bank recently launched a mobile banking platform with mobile phone operators — Safaricom and Zain. “SCB intends to leverage on this IT platform to penetrate the low-end of the market in a cost effective manner,” said Kariuki Ngari, the bank’s Head of Consumer Banking.

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