Wachira Kang'aru
5 August 2009
Nairobi — Standard Chartered Bank has broken ranks with its banking peers to report a 43 per cent increase in its pre-tax profit for the first half of 2009.
The other banks in the so-called top-four category have all reported single-digit profitability over the same period.
In a pointer that technology rather than branch expansion could provide the next phase of growth in the industry, the local subsidiary of the London-based multinational made Sh3.3 billion in pre-tax profit for the six months to June 2009.
This was a Sh1 billion gain from the Sh2.3 billion made over the similar period of last year.
Viewed against the other top-four banks in the country; Barclays Bank, Kenya Commercial Bank and Equity Bank, StanChart looks to have benefited more from a cautious expansion and lending policy.
It also earned a payoff from its focus on the middle and upper classes in retail banking at a time when its peers were expanding to serve the low-end market.
"We are doing business in market segments we know intimately and with products we fully understand," StanChart chief executive officer, Richard Etemesi said.
Over the years, StanChart has made minimal expansion on its branch network, currently at 32, rather going for technology--internet banking and recently, mobile banking-- to leverage its reach in the market.
Biggest costs
The payoff has been in containing its operating costs at a minimal Sh2.5 billion against a revenue base of Sh6 billion and a loan book of Sh50 billion.
"One of the biggest cost in the banking industry is infrastructure-- laying out branches and managing the network," Mr Etemesi said.
Barclays Bank, which reported a five per cent increase in profitability over similar period, has over 117 branches, while KCB with 156 local branches and 26 regional branches recorded four per cent growth in pre-tax profit.
Both cited a slowdown in the overall economy as a key cause for the marginal return.
But with large branch network meant to target the lower end of the market, the pair's slower growth could point to fact that the lower income earners have been more hard-hit by the economic slowdown.
StanChart also recorded an improvement in its loan book, which grew 11 per cent to Sh50 billion while customer deposits grew to Sh95 billion.
"While we are confident about the future, we remain alert to the nature of the financial turmoil around us," Mr Etemesi said of the outlook for the bank.