Standard Chartered net profit drops by 86%
A quick glance at the banks financial books reveals that despite an increase in incomes by sh29b to sh419b; total expend ...
Standard Chartered has registered one of its steepest declines in profit as the banks provision for bad and doubtful debts tripled in 2015. The banks total comprehensive income has dropped by 86% to just sh15b.
A quick glance at the banks financial books reveals that despite an increase in incomes by sh29b to sh419b; total expenditure galloped by sh136b to sh379b to set up the bank for a steep drop in profit.
Behind the monumental rise in expenditure was a triple increase in the provision for bad and doubtful debts to sh118.5b from sh36b the year before. This was in spite of the fact that non-performing loans and assets actually declined by sh6b.
The bank registered a sh19.4b drop in other incomes. Other comprehensive income registered a negative sh13b and other operating expenses rose by sh43b to further condemn profits.
The courts of law have granted Standard Chartered rights to sell off Steel Rolling Mills, the largest steel manufacturing firm in Uganda, to recover a loan amounting to more than sh51.2b.
On January 23, 2014 and December 29, 2014, the bank offered Steel Rolling Mills two amalgamated loan facilities amounting to about sh18b and $10 million respectively. Steel Rolling Mills had jointly sought for temporary relief alongside Nyumba Ya Chuma and Scrap Processors.
The loans to Steel Rolling Mills were to finance the purchase of machinery and equipment for a Sponge Iron Plant to be fixed into the company's factory. Initially, the loan was to be repaid in 96 months (8 years) but the bank made a U-turn and decided to recall the loan much earlier after just 2 years.
Herman Kasekende, the Standard Chartered bank boss noted in a statement that 2015 was a transformative year for the bank on both strategic and structural levels.
"We took bold measures to simplify our organizational structure by stripping out inefficiencies and shifting greater accountability towards performance,
"Furthermore, given the market challenges faced by corporate clients, we undertook a large number of provisions leading to an increase in our bad loan book and thus impacting our profitability," Kasekende explained.