NAIROBI, Kenya, Aug 10 – Stanbic Holdings has cut its loan impairment charges by nearly half, citing improved customer repayments and a strengthening economic environment that is helping reduce credit risks.
The lender said the decline in the cost of credit was accompanied by an improvement in its loan-loss coverage ratio, indicating better asset quality.
“In terms of cost of credit and cost of risk in impairments, 50% down near near, what’s exciting for me is that our coverage ratios continue to increase,” Stanbic Holdings Chief Financial Officer Dennis Musau said.
“Our coverage ratios improved from about 62% to 68% year on year, and therefore, that is not being less conservative. It is actually demonstration that our book is getting better.”
The improvement comes as Kenyan banks benefit from easing economic pressures and a gradual recovery in borrowers’ ability to service loans.
Higher interest rates and subdued economic activity had previously pushed up defaults across parts of the banking sector, forcing lenders to increase provisions against potentially bad loans.
Stanbic said the improvement in customer repayments is allowing it to expand business with existing borrowers while maintaining stronger protection against potential losses.
Stanbic Holdings reported an 8.2 percent increase in profit before tax, while profit after tax rose 6.6 percent to Sh6.6 billion.
Musau said the stronger tax charge partly reflected the absence of tax savings that had boosted the previous year’s results, resulting in taxes growing faster than pre-tax earnings.
The improvement in asset quality provides some relief for the banking group as lenders continue to navigate a challenging credit environment characterised by elevated household and business financing costs.
