STANDARD CHARTERED BANK OF KENYA HALF YEAR 2011 ANALYSIS

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Yesterday evening Standard Chartered Bank Of Kenya (SCBK) announced its financial results for the Half Year ending June 30^th 2011

Profit Before Tax slumped 14.4% to hit Kshs. 3.47 Billion. Profit After Tax is now at Kshs. 2.5 Billion, 11.9% less than the corresponding period last year

The Bank was hit by the rise in interest rates which caused the value of SCBK’s bond portfolio to reduce

SCBK reduced its investment in Government Securities by 40.4% to Kshs. 31.5 Billion from Kshs. 52.8 Billion

Cost:Income ratio rose from 42.53%  to 51.37%. It was helped on its way by the 22.2% rise in Total Operating Expenses to Kshs. 3.66 Billion from the previous year’s Kshs. 3 Billion

These were not the sort of results SCBK shareholders were hoping for, but the surge in Net Loans and Advances, which went up by Kshs. 33.4 Billion or 66.6%, is bound to put a smile on their faces

H1 2010 vs. H1 2011 Analysis

	H1 2010  Kshs.	H1 2011  Kshs.	% CHANGE
TOTAL ASSETS	131.2 BILLION	153.3 BILLION	+16.8%
NET LOANS AND ADVANCES	50.2 BILLION	83.7 BILLION	+66.6%
CUSTOMER DEPOSITS	98.9 BILLION	109 BILLION	+10.5%
LOAN:DEPOSIT RATIO	50.81%	76.61%	+25.8%
TOTAL INTEREST INCOME	5.05 BILLION	5.08 BILLION	+0.6%
TOTAL INTEREST EXPENSE	1.05 BILLION	523 MILLION	-50.4%
NET INTEREST INCOME	4 BILLION	4.5 BILLION	+12.4%
TOTAL OPERATING INCOME	7.05 BILLION	7.13 BILLION	+1.2%
TOTAL OPERATING EXPENSE	3 BILLION	3.66 BILLION	+22.2%
COST:INCOME RATIO	42.53%	51.37%	+8.8%
PROFIT BEFORE TAX	4.05 BILLION	3.5 BILLION	-14.4%
PROFIT AFTER TAX	2.84 BILLION	2.5 BILLION	-11.9%

Customer Deposits were up 10.5% to Kshs. 109 Billion.

The surge in Net Loans and advances pushed up the Loan:Deposit ratio to 76.61% from 50.81%

Interest Income from Loans and Advances as a percentage of Total Interest Income stands at 72.26% in comparison with 58.22% in H1 2010.

With the reduction of investment in Government Securities, interest income from them now comprise 25.69% of Total Interest Income, down from 38.37% in the corresponding half last year

Foreign Exchange Income was up 4.5% to Kshs. 847 Million

Total Fees and Commissions were significantly up by 55.3%, from Kshs. 1.13 Billion to Kshs. 1.76 Billion as a result of “significant growth in loans and advances, trade finance and improved revenues from our custodial business”

Net Non Performing loans were cut by half to Kshs. 313 Million

Total Interest Expenses was down a huge 50.4% to Kshs. 523 Million after the bank significantly cut its cost of funds

‘Other Income’ fell by 13.77% to, following the rise in interest rates which devalued the bond portfolio

Staff Costs registered a slight increase of 4.6% to stand Kshs. 1.7 Billion

Q1 2011 vs. Q2 2011 (Quarter on Quarter Analysis)

	Q1 2011          Kshs.	Q2 2011          Kshs.	% CHANGE
TOTAL INTEREST INCOME	2.45 BILLION	2.63 BILLION	+7.3%
TOTAL INTEREST EXPENSE	242.6 MILLION	280.6 MILLION	+15.7%
NET INTEREST INCOME	2.2 BILLION	2.32 BILLION	+5.0%
TOTAL OPERATING INCOME	4.11 BILLION	3.02 BILLION	-26.5%
TOTAL OPERATING EXPENSE	1.8 BILLION	1.87 BILLION	+4.0%
COST:INCOME RATIO	43.69%	61.83%	+18.1%
PROFIT BEFORE TAX	2.31 BILLION	1.15 BILLION	-50.2%
PROFIT AFTER TAX	1.64 BILLION	859.4 MILLION	-47.6%

The Quarter on Quarter analysis lays bare the tough Q2 that SCBK experienced. Cost:Income ratio for the 2^nd Quarter alone is at 61.83%, from 43.7% in Q1

The Bank made 50.2% less in Profit Before Tax in Q2 2011 than in Q1 2011 and 47.6% less in Profit After Tax

Earnings Per Share was down 16.6% to 8.71/=

With yesterday’s closing price of Kshs. 209/=, the bank is trading a Forward P.E of 12, way above of its peers