Stan-Chart Profits Drop 13.0% in Q1-2025
Standard Chartered Bank Kenya Plc reported KES 6.64Bn profits before tax (PBT) for the first quarter of 2025 (Q1-2025), representing a 13.0% decline compared to KES 7.64Bn announced same period in 2024. The performance was mainly impacted by low interest income from loans and advances occasioned by foreign currency loan book revaluation and reduced local loan disbursements on account of elevated interest rates albeit declining. The strengthening of the Keya shilling hit both the counter’s foreign interest income and the forex trading incomes to recorded faster declines.
Profits after tax (PAT) also thinned by 13.5% from KES 5.62Bn in Q1-2024 to KES 4.86Bn in Q1-2025 on a slightly higher effective tax rate. This saw the Bank’s earnings per share (EPS) drop 11.6% year on year (y-y) from KES 14.42 to KES 12.75, annualized to KES 51.00 per share from an actual EPS of KES 52.65 in full year 2024 (FY-2024).
We retain a BUY recommendation on the Stan-Chart’s current share price of KES 269.50 per share as of 21st May 2025, with target price of KES 300.00 as earlier advised in our May 2025 stock recommendations. We further retain a dividend forecast of above KES 30.00 per share for FY-2025, representing an above 11.5% forecasted dividend yield for an above 58.9% projected dividend payout ratio in comparison to an annualized EPS of KES 51.00. We expect the returns to be eve higher considering the Bank’s dividend payout policy of above 80% of earnings.
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Income Statement
Net interest income (NII) declined marginally at 0.8% to KES 8.21Bn in Q1-2025 from KES 8.27Bn reported in Q1-2024 driven down by low interest income from a shrinking loan book and higher expenses of financing the same loan book. NII contribution to total income enlarged from 63.3% in Q1-2024 and from 65.6% in Q4- 2024 to close Q1-2025 at 70.8% on higher returns from its core business.
Total interest income shed 2.4% from KES 9.52Bn in Q1-2024 to KES 9.29Bn slowed down largely a 12.6% decline in interest income from loans and advances from KES 5.73Bn to KES 5.01Bn, largely impacted by a 10.2% drop in the bank’s loan book. The drop in loan book appear to be intentional as the Bank went aggressive in investing in government securities in a move seen to contain the high industry non-performing loans (NPLs) ratio that hit a high of 17.2% in February 2025 from 16.4% in Dec. 2024 and 15.7% in March 2024.
As a result, the yield on loans and advanced thinned from 14.5% in Q1-2024 to 13.8% in Q1-2025.
Interest income from government securities however, jumped 69.4% on the above aggressive investing, which saw the securities book nearly double from KES 50.34Bn in Q1-2024 to KES 97.67Bn in Q1-2025. In return, return on government securities remained relatively stable from 14.2% in Q1-2024 to 14.1% in Q1-2025 to defy the faster decline in rates in the bonds market as informed by the Central Bank rate (CBR).
In the reporting period, official base lending rate dropped 50.0bps from 11.25% in Dec. 2024 to 10.75 in Mar-2025, lower in relation to a CBR of 13.00% of Q1-2024. This saw overall yield on assets decline from 17.2% in Q1-2024 and from 16.1% in Q4-2024 to 14.9% in Q1-2025.
Interest expense was contained at KES 1.09Bn, a 13.1% y-y drop from that of KES 1.25Bn for Q1-2024 as the Bank cut on its customer deposits and placements from other related banks.
Non-funded income surged dwindled 29.3% from KES 4.79BN in Q1-2024 to KES 3.39Bn, lessened by low forex trading income which sunk 59.1% from KES 2.53BN to KES 1.03Bn as the shilling remained stable.
Operating expenses were contained at KES 4.96Bn in Q1-2025, an 8.7% drop from KES 5.43Bn supported by employee redundancies that happened in the quarter. This was as the bank restructured its costs by via digitization and branch rationalization to contain the by then escalated costs.
The Lender’s loan loss provisions came down 24.7% from KES 0.55Bn to KES 0.41BN to realign with the loan book drop and already provided for.
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Balance Sheet
Stan-Chart Kenya’s total assets contracted 2.3% from KES 391.34Bn to KES 382.26Bn held down by the thinning shrinking balances from its parent company and subsidiaries which shrunk by 31.0% or KES 36.29Bn from KES 117.22Bn in Q1- 2024 to KES 80.93Bn in Q1-2025.
The asset book decline was also impacted by a 10.2% y-y decline in total loan book from KES 153.58Bn to KES 137.86Bn in Q1-2025. Total government securities book however nearly double at 94.0% from KES 50.34Bn in Q1-2024 to KES 97.66Bn in Q1-2025 on increased attention in the space to manage bad NPLs.
Shareholders’ funds improved 12.0% y-y from KES 67.96Bn to KES 76.09Bn mainly to benefit the rising bank reserves and retained earnings. The bank’s other reserves climbed 689.9% to KES 823.86Bn as the retained earnings gathered 4.5% to KES 48.55Bn.
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Key Ratios
Net interest margins (NIMs) declined from 15.6% in Q1-2024 to13.4% in Q1-2025 pulled down by the declining lending rates and a slightly higher cost funds. The Bank’s cost of funds moved up 20.0bps from 1.5% to 1.7%.
The Bank however remained among the few with high NIMs. The Bank’s overall cost of cost edged down to 1.1% in Q1-2025 from 1.5% same time 2024, benefitting from a general drops in both loan book its loan loss provisions.
Both the return on average assets (ROaA) and return on average equity edged down as the overall decline in net revenues and the assets. ROaE dropped faster from 34.7% in Q1-2024 to 26.3% in Q1-2025 on a faster drop in net revenues compared to the rise on the shareholders’ funds. This was as ROaA shed 4.9bps from 5.5% in Q1-2024 to 5.1% by end of Q1-2025 slowed by drops in both net revenues and assets.
