Kariuki Ngari, Chief Executive Officer, said: “We are weathering the health crisis well and our strategic transformation continues to progress. We remain strong and profitable, although earnings in 2020 were clearly impacted by higher provisions and reduced economic activity, in each case the result of COVID-19. Overall, income declined as did our profit for the year, notwithstanding tight control of expenses. The actions taken in recent years to improve the quality of our balance sheet sheltered us from some of the worst effects of the pandemic, but we nonetheless incurred credit impairment charges that were significantly higher than the prior year. This resulted in profit after tax decreasing by 34 per cent, but we ended the year with a total capital ratio of 18.47 per cent. The Bank also retained a highly liquid balance sheet and we enter 2021 well equipped to see through the remaining challenges of COVID-19, and importantly, well positioned to benefit from the subsequent upturn in the economy. Finally, I am proud of the way our colleagues responded to the challenges of the pandemic by supporting each other, our clients and community.”
Summary financial performance
- Operating income declined 4.5 per cent reflecting the subdued economic activity in 2020;
- Net interest income declined 2 per cent due to lower interest rates coupled with pandemic relief measures;
- Non- interest income decreased 10 per cent with reduced volumes more than offsetting a particularly strong performance in Financial Markets;
- Operating expenses increased by 1 per cent with the impact of COVID-19 resulting in a net
reduced spend on travel & entertainment and other discretionary costs more than offset by the continued focus on investing in new digital capabilities;
- Loan impairment increased by KShs 3,309 million to KShs 3,882 million. This was mainly driven by a KShs 1,549 million increase in impairments across all client segments as a direct result of the pandemic and includes a net increase in the judgmental management overlay of KShs 970 million that the Bank proactively reserved for forward-looking risks.
- Having made substantial provisions against expected credit losses during the year, conditions have stabilised somewhat in 2021. However, despite these encouraging signs, the credit risks facing the Bank are likely to remain elevated during what is likely to be a difficult economic recovery ahead.
The balance sheet remains strong and highly liquid.
- Customer deposits increased 12.3 per cent while net loans and advances to customers decreased 5.6 per cent. Focus on digital migration and ongoing investment in technology platforms continues to drive growth in the deposits. Funding quality remains high with current and savings accounts making up 88 per cent of total customer deposits.
- The liquidity ratio at 71.49 per cent remains well above the regulatory threshold.
- The total capital ratio of 18.47 per cent is above the regulatory minimum and within our capital risk appetite.
On 19 June 2020, the bank announced that in response to the unprecedented challenges facing the world due to the COVID-19 pandemic, the Board had decided after careful consideration to vary the recommendation to pay a final dividend for 2019 of KShs 15.00 per ordinary share to KShs 7.50 per ordinary share which increased the total capital ratio by 106 basis points. This decision enabled the Bank to provide support to individuals, businesses and our communities while keeping our staff safe, and invest to transform the business for the long term.
The Board is recommending the payment of a first and final dividend for the year of KShs 10.50 for every ordinary share of KShs 5.00. The Board recognises the importance of dividends to shareholders and believes in balancing returns with investment to transform the business for the long-term, whilst at the same time preserving strong capital ratios that enable support for Standard Chartered Bank clients.
Improving prospects for COVID-19 vaccines should enable the economy to transition back to growth through 2021. The Banks focus has been and commits to continue protecting staff and their well-being; supporting clients; and standing with our communities.