CfC Stanbic Posts 150 Percent Profit as Merger Bears Fruit

May 12, 2010 (Business Daily/All Africa Global Media via COMTEX) -- CfC Stanbic Bank recorded a 151 per cent rise in earnings for the first quarter of the year in a sign that the biggest merger in Kenya's banking sector history is starting to pay off.

The bank chalked up Sh563 million in after-tax profits for the first three months of the year compared to Sh224 million in the same period last year.

Although the bank's newly appointed managing director Greg Brackenridge was unavailable for comment, published financial statements indicated that higher transactional volumes provided an earnings impetus for the bank.

Coming two years after South Africa's Standard Bank's -- under the continental name Stanbic Bank -- merged operations with CfC Holdings Group, the latest performance points to the changing fortunes for the bank buoyed by a rebounding Kenyan economy.

An estimated 80 per cent of the group's business is in banking while the rest is in insurance, financial and investment advisory services.

CfC Stanbic Bank's triple digit growth figures comes on the back of a 114 per cent rise in non-interest income from Sh551 million in the first quarter of last year to Sh1.18 billion in the first quarter of 2010.

Fees and commissions income was up 105 per cent from Sh58 million in the first quarter of last year to Sh119 million within the same period this year.

The bank's treasury department revved up its currency trade operations to earn Sh292 million in the first three months of the year compared to Sh182 million earned last year.

But it was the contribution of other transactional income which was up six times from Sh73 million last year to Sh543 million within the same period this year that raised CfC Stanbic's earnings.

CfC Stanbic's loan book grew by 6.4 per cent to stand at Sh46.7 billion compared to Sh43.9 billion in the first quarter of last year.

Interest income from loans and advances was up a marginal 4.1 per cent from Sh1.24 billion in the first quarter of last year compared to Sh1.3 billion in the first quarter of this year.

Deposit mobilisation however raced past lending to grow from Sh56 billion to Sh69 billion which the bank managed to raise at a cheaper rate than last year.

The cost of deposits was down from 1 per cent in the first quarter of last year to 0.7 per cent in the first three months of 2010.

In a sign that the CfC Stanbic is making huge bets on the fixed income market, investments in government securities were up 103 per cent from Sh6.1 billion at the end of March last year to Sh12.4 billion within the same span of time this year.

Income earned as interest from government securities however edged downwards 8.4 per cent in the first quarter of the year to Sh185 million, mirroring the declining yields from fixed income securities.

Since the merger in 2008 CfC Stanbic Holdings has been carrying out a reorganisation exercise to bring together similar entities and spin off others

The firm is in the process of separating its insurance unit from its other units.

The demerger will lift a burden off CfC Stanbic Holdings limited which saw its earnings dip last year in the face of trying times for its insurance firms.

Impairment losses

The firm recorded Sh709 million in profits before tax compared to Sh1.3 billion last year as earnings fell sharply from Sh846 million in 2008 to Sh35.9 million last year.

A doubling of impairment losses on equities which the insurance subsidiaries have invested had huge reductive impact on the CfC Stanbic's income.