Standard Chartered Bank of Kenya posted a 14.6 per cent fall in first-half profit, as operating costs rose and a jump in interest rates devalued its bond portfolio, it said on Wednesday.
A unit of Britain’s Standard Chartered Plc., the bank is the second of the country’s major banks to post a profit drop for the period, hobbled by rising interest rates since the start of last year.
National Bank of Kenya’s profit slid 8 per cent during the period on the back of revaluation of its bond portfolio, after yields rose by more than 300 basis points across the curve.
“Standard Chartered have marked their bond portfolio to market. This is something many of its peers avoided ... I thought the results were more than respectable,” said Aly Khan Satchu, an independent analyst.
The bank said it was positive about the second-half outlook as it unwinds corrosive trading positions in the bond market and increases lending to customers.
“The overall financial results for the first half were significantly impacted by the sharp rise in interest rates, which resulted in the revaluation of our trading book,” chief executive Richard Etemesi said in a statement.
The revaluation caused a mark to market unrealized loss in the bank’s bond trading portfolio and derivatives, leading to the drop in profit to 3.5 billion shillings ($37.4-million) from 4.1 billion shillings in the year-earlier period.
“The outlook for the second half remains positive. We have begun to see the unwinding of the mark to market position and, coupled with continuing growth in loans and advances, we anticipate strong revenue momentum,” Mr. Etemesi said.
During the period under review, the bank cut its investment in government securities by 39.6 per cent to 31.5 billion shillings.
Net interest income rose 12 per cent from the same period last year to 4.6 billion shillings, while operating costs jumped by 21.7 per cent to 3.4 billion shillings.
StanChart’s loan book grew by 67 per cent during the period to 83.7 billion shillings, lifted by demand from the corporate and small to medium-sized enterprises sectors.
“The bank has apparently repositioned its lending towards customers and the underlying organic growth metrics indicate a more forward posture,” Mr. Satchu said.