Nairobi — Standard Chartered Bank yesterday recorded a 25 per cent increase in pre-tax profit to Sh4 billion last year, and unveiled a new plan to fatten its capital base.

The profit take presents a laboured improvement on the Sh3.2 billion take for the previous year, and one which the bank will be keen to flaunt, having been attained during a period when interest earnings were severely constrained.

Chief executive officer Chris Hart said the financier hoped to inject at least Sh2.8 billion fresh capital through a preference shares issue to the firm's main shareholders, London-based Standard Chartered Plc.

The infusion of fresh capital, he said, would enable the bank to bring up its capital base to a level which would be adequate to support the kind of business and asset growth it plans for the future.

"We want to match our capital with the asset base. We chose this path of preference shares over other capital-raising options as it would enable us to receive the money in trickles, at one with the rate of growth of our assets," Mr Hart told a briefing held at The Stanley Hotel in Nairobi yesterday.

The proposed debt instruments, which would be non-voting and non-redeemable, will stay in the in-tray until approval is received from the firm's annual general meeting in May.

The proposal has already received "tentative" approval from the Capital Markets Authority.

The bank paid the price for placing a heavy bet on government securities at a time when earnings from this instrument have been pushed to a bare minimum.

Tellingly, its earnings from this category diminished from Sh3.2 billion to Sh2.7 billion.

Overall, net interest income was a lower Sh3.8 billion, against a previous level of Sh3.8 billion.

Mr Hart said the biggest challenge for the bank would be in unbundling its government paper portfolio - still one of the highest in the industry at around Sh31 billion - and investing heavily in consumer and commercial loans.

During the year, the firm was able to grow its loans and advances by 13.6 per cent to Sh18.9 billion on the back of an aggressive push for personal loans that saw the bank even "take over" loans originally taken from competitors.

The bank's popular unsecured loans product grew 300 per cent, while lending to small scale businesses went up 32 per cent.

There was a significant drop in the bad debt charge to the profit and loss account, which the CEO attributed to more strident risk assessment and control. The figure fell 33 per cent to Sh81 million, compared to a previous year's figure of Sh122 million.

Shareholders will benefit from a final dividend of Sh4.10, which brings the total for the year to Sh8.50 per share with a par value of Sh5.

The bank also announced a bonus issue of shares during which holders will get one unit for every 10 held.

The function was attended by the chairman, Mr Hannington Awori, directors and some shareholders.