Standard Chartered Bank of Kenya aims to bring bad debts down to below 5 percent of its loan book by the end of this year from 7 percent in the first quarter, its chief executive said. Bad debts at the Kenyan division of Standard Chartered Plc jumped to 11 percent of lending in 2014 after it started treating loans that had not been repaid for three months as bad, rather than six months previously.
Reducing the level to below 5 percent would bring the bank into line with the Kenyan industry average. Total bank bad debts stood at 5.6 percent of loans in December, up from 5.2 percent in 2013, central bank figures showed.
"We expect to bring it down to below 5 percent by the end of the year through aggressive recovery efforts and also making sure the existing book is well managed," Standard Chartered Kenya Chief Executive Lamin Majang told Reuters.
Loan impairment charges soared 249 percent to 864 million shillings ($8.9 million) in the first quarter of this year, cutting pretax profit by close to a third.
Several local companies were among borrowers whose debts were classed as distressed after Standard Chartered changed its definition of bad debt. Bankers say Kenya's central bank has been pressing lenders for more action to cut bad debts. But Majang said Standard Chartered changed its definition based on an internal review.
Majang said the bank's custody business was picking up after a 75 percent drop in inflows from foreign investors in January, when the government imposed a new capital gains tax. The fall in flows hurt the bank's foreign exchange income.
The tax was imposed on gains in the debt and equity markets, initially hitting trade sharply across the market. Volumes have since picked up.
"Those investors have come back into the market so we have seen the volumes go back more or less to the pre-January levels," said Majang.
On the retail side, the bank, which focuses on upper and middle class customers, plans to launch life and non-life insurance products in a venture with insurance firms before the end of the month, Majang said.
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