Stanbic Kenya bucked the expected trend that banks will by dividend-shy after a year of the Covid-19 and became the first bank to announce their full-year 2020 results, and with an unexpected dividend for shareholders.
During the year, the bank, part of the largest financial group in Africa, set out to support the resilience of their customers, staff and the community. 60% of staff now work from home, and 80% of transactions are done on mobile phones. For customers, they extended moratoriums on Kshs 40 billion of loans, that benefited 7,200 customers, and that included Kshs 3.1 billion to SME’s. They also waived charges on digital transactions and paid out 400 retrenchment insurance policy claims. While the banking industry repayment moratoriums that were set in March 2020 lapsed this month, management, led by Kenya Chief Executive, Charles Mudiwa, said that 80% of Stanbic’s customers had reorganized themselves and resumed repaying their loans by December 2020.
Also, the second half of the year was one of recovery of growth and overall, they managed to grow deposits by 12% to Kshs 217 billion and loans by 4% to Kshs 158 billion, while reducing their cost to income ratio, from 56% to 52%.
Stanbic Kenya’s profit after tax was Kshs 5.2 billion, down 19% from the previous year, but the pre-provision profit was up 2%. The bank will pay shareholders Kshs 3.8 per share for a total payout of Kshs 1.5 billion. This is equivalent to 29% of their earnings, and the bank’s management said that, with its strong capital and liquidity, they should also support Stanbic Kenya’s shareholders. They retain a positive outlook for 2021 even as Covid-19 continues, amid the ongoing distribution of vaccines worldwide.
Stanbic Kenya has launched “It Can Be,” a new way of engaging with customers, particularly with women and small & medium enterprises. Stanbic is the second-oldest bank in Kenya, having started over 100 years ago and grew to later merge with CFC Bank in 2007. Today, it is a Tier-I bank with $3 billion assets in Kenya and serves over 200,000 customers with services in corporate & retail banking, wealth management, investments, and insurance.
“It Can Be” symbolises a new push to engage with customers, in the new decade, beyond Stanbic’s 26 branches in the country. The bank has transformed and adopted digital-based solutions to serve its customers who have also largely shifted to online and digital after business disruptions with the emergence of Covid-19. One new Stanbic tool is automating core functions in documentary trade finance using artificial intelligence (AI) and natural language processing (NLP) for real-time counter-party verification, giving customers quick feedback while reducing trade risks.
Stanbic Kenya CEO Charles Mudiwa spoke at the “It Can Be” launch and mentioned how Covid-19 had shown the importance of relationships and standing with communities. He added that the bank’s customer focus had shifted to being relationship-based and Stanbic has embraced four policy initiatives of funding, markets, business competitiveness and influencing policy. In its third-quarter 2020 financial results, Stanbic Kenya announced that it had extended loan restructurings to 23% of its customers, at no cost, to cushion them from the effects of Covid-19. It also reduced the interest charged on existing loans and waived charges for using the bank’s digital platforms.
Stanbic is the largest bank group in Africa, with $151 billion in assets and a presence in twenty countries on the continent. Its largest shareholder is the Industrial and Commercial Bank of China, the world’s largest bank that owns 20.1%. Stanbic Kenya is listed on the Nairobi Securities Exchange (NSE) and shareholders receive a high dividend yield of 8%. Stanbic Africa is also increasing its shareholding of the Kenyan bank to 75% by buying shares from other shareholders.
Stanbic Bank Kenya has appointed Brigid Kosgei, the world record-holder in the women’s marathon, as the brand ambassador for “It can Be”, making her the face of the campaign in the country. The bank will work with her on her passions of education and community development while also advising her on wealth management and entrepreneurship.
The 27- year-old is the two-time winner of the London and Chicago marathons. She is the current holder of the women’s marathon world record, a time of 2 hours, 14 minutes, and 4 seconds which she set at the Chicago Marathon in 2019, smashing the previous record time of Britain’s Paula Radcliffe that had stood for sixteen years, by an astounding one minute and 24 seconds.
For all the acclamation and adulation that Kenyan track athletes receive, especially during the Olympic games, this is a rare event as Kosgei is one of the few female athletes in the country to land a major partnership deal and with a top brand – Stanbic is the largest bank group in Africa. Other smaller deals in the past went to Pamela Jelimo with Milo and Edna Kiplagat with Bank of Africa.
At the announcement event for the partnership, Kosgei, who hails from Kapsait in Elgeyo Marakwet county, spoke of the hardships she has overcome from being unable to finish her schooling, missing her first flight and other steps she has stumbled on in her life’s journey. Then, when she started in marathons, with encouragement and guidance from her coach, on how she improved her times racing Porto, Milan, then Lisbon and on to Chicago. She also spoke of her training for the Tokyo Olympics that was postponed from 2020 due to Covid-19, and which she plans to be ready for, once the event dates are confirmed.
After a long quiet period, banks results for the second quarter of 2020 have started tricking in. This week saw four large banks – KCB, Cooperative, Stanbic and NBK all publish their June results, showing the impact of COVID-19 that started to be felt after the first quarter of the year.
The bank rankings are (1) Kenya Commercial Bank – Kshs 730 billion assets, (4) Cooperative Bank – 505 bn, (7) Stanbic Kenya – 350 bn, and (11) National Bank – 119 bn which is now a subsidiary of KCB
There has been less banking and economic activity: Stanbic was the first to flag this in its quarter-one results. KCB’s half-year results showed branch tellers handled 20% fewer transactions compared to 2019. There was also a 20% reduction in ATM transactions, while the number of mobile transactions did not increase significantly despite fee waivers.
There was a decline in mobile loans advanced at KCB from Kshs 103 billion to 90 billion.
There has been extensive restructuring of loans. KCB has restructured Kshs 101 billion, Co-op 39 billion, and Stanbic 38 billion.
IFRS-9 is being set aside as the world grapples with recovering from COVID. While KCB’s provisions were up Kshs 8 billion, after absorbing National Bank, and their non-performing assets increased from 8% to 13%, bank provisions have not increased significantly.
Growth in deposits at large banks, a flight to safety, has not been matched by an increase in lending to customers. There has been much faster growth in deposits than with loans, that has ended up in higher treasury bills and liquidity at banks.
Reduction in profits: KCB half-year profits were down 40% compared to 2019, while Stanbic’s were 36% lower.
The banks are seeing improvements now that the economy has opened up and travel restrictions were lifted in July 2020, all helping the manufacturing, floriculture and tourism sectors.
Standard Bank (Stanbic) Group Kenya released their Macroeconomic update in which they are cautiously optimistic about Kenya’s growth through the private sector. The presentation in Nairobi was done by Jibran Qureishi, the Regional Economist – Africa at Stanbic.
Stanbic economists believe that global growth will fall in 2020 and 2021 as central banks in advanced economies are tapped out and their ability to stimulate economies is limited. Chinese growth will slow to sub 6% in 2020 and be about 5.5% in 2021. Meanwhile, the US cut its rates three times last year but investments are still falling as the trade war with China has hurt growth.
For Kenya, Stanbic expects 5.9% GDP growth in 2020, up from 5.6% in 2019. Three things that held back private sector over the last two years were interest rate caps, delayed payments by government and congestion at the Inland Container Depot (ICD) Nairobi.
Government policies should focus on private-sector driven economic growth. There is growth but where are jobs? Growth in the wrong place. 90% of new jobs are the informal sector and also in the service sector but these will not create a middle-income economy.
Tourism was resilient, earning $1.5 billion last year, but the potential is much larger and this depends on how much private investment the sector can attract. Kenya gets 2 million arrivals but Mauritius, Morocco, Egypt and South Africa get about 10 million in bad years.
Ambitious tax revenue targets embolden the government to spend more and tax revenue targets are still much larger than average collections.
If the government does not fix fiscal issues, this will lead to unpredictable tax rules which could hamper productive sectors
A move back to concessionary loans and away from commercial loans for the first time since the (President) Kibaki years is a welcome step.
The Standard Gauge Railway (SGR) may still get extended to Uganda but the government will have to build new ICD. It is not that China does not have money, but they are asking questions they should have asked 7-8 years ago.
Kenya traditional manufacturing has been an import-substitution model which has not really worked around the world. Better to shift from being protectionist and instead work towards growing exports which (excluding tea and remittances) have been stagnant – at $6 billion a year
Don’t focus on manufacturing too much and neglect agriculture, as a big part of that will come from agro-processing and adding value to agricultural produce.
Charles Mudiwa the CEO of Stanbic Kenya spoke of how the bank has aligned to the government’s agenda. They are a shareholder in the Kenya Mortgage Refinance Company, and 20% of their lending goes to manufacturing with another 9% going to agriculture & food security.
Stanbic was the lead arranger for the Acorn green bond that was listed on London’s LSE today. The bank also has a DADA program to promote women financially (with a goal to lend Kshs 20 billion) and is also supporting financial literacy training to musicians and Uber drivers.