Standard Chartered's customer deposits down 19%, but profits up 49%

Buckle up; this article is going to be full of inverses—numbers that dance to their own tune.
We'll kick things off with the dividend; the board approved an interim dividend of KES 8. Shareholders are definitely pleased by the news and will be eagerly waiting for the 8th of October; the share register closes on Sept 18. This is the first HY dividend cheque that shareholders will be receiving in a long time; here are the bank's numbers that warranted the payout.

The 4 strategic pillars of SCBK i.e the Network, the Affluent, Mass retail & Sustainability as often mentioned by Mr. Kariuki are working magic for the bank. They understand their customer fairly well and are therefore best positioned to offer them best-in-class service. Understanding the customer paired with high quality offerings based on the data will always pay off, and this case is no exception; the bank posted a pre-tax profit of KES 14.5B - a 50% growth YOY¹ growth. This profit came from interest income that grew 19% YOY¹ to KES 16.52B and non-interest income that grew by a healthy 36% YOY¹ to KES 9.56B - highlighting the firm's strong fundamentals. The overall operating income grew by 25% to KES 26.1B. Income growth was driven by increase in volumes and improved margins.

The firm’s understanding of their customer has unlocked value for shareholders by achieving a low NPL ratio. The ratio of 8.4% points to the quality of the firm's assets, a positive decrease from a high of 9.7% as of 31 Dec. And of course, with a low NPL ratio, more capital can be freed up from loan loss provisions and allocated to revenue-generating activities, this is exactly what the firm did - reducing loan loss provisions by 23% YOY¹. Earnings per share are up 49% to KES 26.99 - it's always good to see growth in the EPS.

As with all stories, there are a few areas where the firm didn't perform as well as some might have expected. For starters; customer deposits fell by 19% for HY 24 to KES 276.4B - according to the firm this was driven primarily by foreign currency revaluation on the back of a strong shilling as well as a reduction of local currency deposits. Nonetheless, funding quality remained high with current and savings accounts making up to 96% of total customer deposits. Net loans and advances also decreased by 8% for HY 24, again, driven by foreign currency revaluation. Operating expenses increased by 9%, higher staffing costs and the firm's investments in digital capabilities we some of the reasons for the increase.

Here were Kariuki's closing remarks -

We have delivered a strong financial performance in the first half of the year, achieving these results by focusing on our clients and solving for them. While we are conscious of the external macroeconomic headwinds, both global and local, we believe we have the right strategy and are uniquely positioned to take advantage of the growth opportunities that arise while proactively managing the risks.

Conclusion

SCBK is a firm in its own lane doing its own thing. The numbers tell us everything; the firm is in good shape and continuing to create value for both the customer and shareholders. Their risk management team read the writing on the wall, with regard to government secuirities - about 16% of total assets are in government secuirities. This low exposure has kept them off of the ratings agencies' radar of risky investments. Mr Kariuki is doing a commendable job steering the ship, focusing on the 4 strategic pillars and delivering value for both the customer and the shareholder. This is a well oiled machine that's found its niche and is serving it, quite well might I add. I would've loved to see what an SCB expansion in the region, I might be late unfortunately and would've had to invest in the LSE².

Resources

Standard Chartered Bank Kenya press release - HY24 , Standard Chartered Bank newsroom

NOTE: Some of the data used in this piece was made available to me by my broker.

YOY - year over year ↩ ↩² ↩³ ↩⁴
London Stock Exchange ↩

NOTE : These are personal opinions and aren't shared by the firm, our shareholders and/or associates

Conclusion

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Footnotes