26 March 2014

Kenya: Stanchart Takes Battle to Investment Banking

COMEPETITION among commercial banks for lucrative investment advisory services is set to hot up with Standard Chartered bank announcing yesterday it will be going flat out to land major infrastructural deals.

The third largest lender by profitability said it was targeting deals in upstream oil and gas, power generation and major transport infrastructural projects leveraging on its global experience.

The services will be managed from its Johannesburg office where they were transferred to after the Middle East and East Asia-focused lender closed down its Nairobi corporate advisory unit last October.

Investment banking has become increasingly attractive to lenders seeking to grow their revenue streams.

Largest bank by market value KCB last month got a licence from the Capital Markets Authority to run a subsidiary, KCB Capital.

Ecobank Kenya also said last month it expected its last December application to be cleared by the CMA by end of this month with operations set to kick off in June.

Other banks with established investment banking arms include Barclays, CfC Stanbic (SBG Securities), Equity, Co-op (Kingdom Securities), Commercial Bank of Africa, NIC and Chase(Genghis Capital).

Stanchart made the announcement after reporting a 14.8 per cent growth profit after taxation to Sh9.24 billion for the year ended December 2013 compared to Sh8 billion a year earlier.

Chief executive Lamin Manjang attributed the growth to a 13 per cent rise in total revenue to Sh23.8 billion.

The performance now places Stancart third in profitability among tier one banks behind KCB's Sh14.3 billion and Equity's Sh13.3 billion. It has leapfrogged Barclays that is now placed bottom at Sh7.6 billion behind Co-op's Sh9.1 billion.

The growth was largely powered by a 35.9 per cent increase in interest from government securities to Sh5.94 billion, a 10 per cent drop in interest expenses to Sh4.9 billion and a 4.2 per cent rise in interest on loans to Sh15.3 billion.

"We maintained a strong financial performance in all segments," Manjang said. "We delivered against a balanced score card of growth, performance, cost control and risk management."

The bank owned 73.89 per cent by London-based Standard Chartered PLC loaned out Sh17 billion more in 2013 to close its books at Sh129.7 billion from Sh112.7 billion in 2012.

Bad loans increased to Sh3.8 billion from Sh2.2 billion previously.

Customer deposits climbed to Sh Sh154.7, a growth of Sh14.2 billion over the previous year.

Operating costs also edged 11 per cent up to Sh9.5 billion helped mainly by a 10 per cent surge in staff costs to Sh5.1 billion and a nine per cent increase in amortisation costs to Sh1 billion on increased investment in infrastructure and technology.

The bank has declared a dividend payout of Sh14.50 a share, a modest 16 per cent growth from Sh12.50 a year before after a significant share of earnings were retained to bolster its capital base.

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