Johnstone Ole Turana

31 August 2010

CfC Stanbic Holdings has reported a turnaround, propped by the resurgence of the stock market.

The financial service provider which consists of CfC Stanbic Bank, Heritage Insurance, CfC Life Assurance, CfC Financial Services and Stanbic Investment Management Services saw its non-interest income grow by 98 per cent to Sh3.3 billion for the first half of this year compared to Sh1.7 billion for a similar period last year.

"The strong recovery of the equities market boosted the overall performance and we are optimistic the second half will be better as the restructuring process comes to an end," said Mr Kitili Mbathi, the group managing director. Whereas each entity recorded healthy growth for their respective top lines, the claw back from the impairment charges has provided CfC Stanbic Holdings the firm ground to move upward.

The income after huge impairment last year improved by close to Sh2 billion to Sh6 billion from Sh4 billion for the first half of last year. The group profit after tax edged up by 53 per cent to Sh836 million from Sh536 million for the first six months. The buoyant performance of its insurance business was the main driver into profitability territory even as the firm pushes to have the insurance operate as an independent entity.

According to Mr Kitili, the firm has applied to the Capital Market Authority (CMA) seeking the approval to list by way of an introduction the CfC Insurance Holdings. Listing by introduction involves getting a firm listed at the stock exchange without having to sale shares to the public.

It's only once listed that existing shareholders can free trade their shares to the public. The listing is targeted to be completed before the end of the year. The strong performance of the insurance and the financial services entities was attributed to the improved gross underwriting and introduction of new product lines such as unit trusts which pulled in more revenue.

"The improvement on the impairment charges has been critical to our positive progress as our investment incomes segment have grown strongly," said Mr Abel Monda, the managing director for CfC Life Assurance. On its part, CfC Stanbic Bank recorded a flat income growth from its main banking activities largely due to the implementation of a uniform core banking system that ended up slowing down the growth of the loan book.

"The flat net income was due to low lending as we grappled with the implementation of the T24 core banking system to integrate both CfC Bank and Stanbic Bank into a uniform platform," said Mr Gregroy Brackenridge, managing director for the merged CfC Stanbic Bank.

CfC Stanbic Bank net interest income which comes from loans and overdraft facilities was flat at Sh1.85 billion from Sh1.82 billion earned in the first half of 2009. However, the bank pushed up its profit after tax by 47 per cent to Sh725 million from Sh492 million thanks to a twofold increase in non-interest income to Sh2.7 billion from Sh1.2 billion.

Mr Brackenridge said with the completion of the integration, the bank is expected to harness the synergies of operating form a common platform hence reduce overall cost.