Stanchart promises profits even in economic difficulty

This is after harsh economic conditions in the country, resulting mainly from the persisting cedi depreciation, power crisis and a burgeoning national debt stock conspired to subdue the bank’s performance in the first six months of the year.

Over the period, the cedi has lost about 30 per cent of its value to the US Dollar, the power rationing, which is the result of a supply deficit, has persisted; forcing businesses to either shutdown, reduce their operations or switch to non-traditional but costly alternatives, and the national debt stock has risen from GHS76.1 billion in December 2014 to GHS88.1 in June, this year.

The result has been a consistent increase in inflation, a weakening consumer sentiment and a generally costly environment for businesses, which have consequently subdued growth in companies, including StanChart.

The bank's first half year results showed that growth in net interest income slowed down to GHS186.1 million in June, this year, compared to the GHS169.8 million recorded in the corresponding period last year.

The marginal growth in interest income translated into a 34 per cent decline in the bank’s net profit. On the other hand, operating expenses and provisions for loan impairments witnessed strong growths, increasing by 32.1 per cent and 107.5 per cent respectively within the period. Loans and advances, however, recorded negative growth.

Responding to risks

Despite the negative growth in loans and advances, the half year results showed that StanChart’s investments in government securities, commonly called treasury bills, rose by some 20 per cent to GHS368 million, in the period under review.

The bank’s Regional Head of Corporate and Institutional Clients (CIC), Mr Tejinder Sing, said at a press briefing in Accra that the development was a clear manifestation of the difficult operating environment StanChart was immersed in within the first six months of the year.

The drop in loans, he said was clearly a short term strategy in response to the macroeconomic environment within the period.

“I think most investors would appreciate that as a bank, we have to take measures to avoid risks and we have to respond to an environment. So, this is not a long term strategy and the bank is not reducing its asset growth as a result of structural constraints on its balance sheet,” Mr Sing said in response to why the bank cut down loan disbursements to businesses and individuals.

“On the other hand, the bank is doing that to try and be measured in its risk taking ability and to be able to better respond to opportunities in the overall rebound of the economy,” he said during the video conference,which was relayed to shareholders, investors and the media from the bank's headquarters in Accra.

Expected rebound in growth

Although StanChart now expects growth to rebound in the third to fourth quarters, its Managing Director, Mr. Kweku Beddu-Addo, said that optimism would be premised on an expected rebound in the economy from the current challenges.

“We are currently going through a front-loaded fiscal consolidation process and that is a tough pill for any economy to endure. We don't expect that to continue into the next 12 to 18 months from now, which means that growth would rebound and the burden would become a bit lighter on the economy."

"We also know that more oil will be coming on stream within the next 12 to 18 months, which means that Ghana's oil production will grow up from the current level and that should be a good source of foreign exchange.”

“Additionally, the availability of gas will help to bring down the energy crisis. These factors, together with the domestic arrears that the government will be clearing, some of which affect our clients, are the reasons why we take that view that things will turn around in the second half of the year," he said.

Generally, the bank's Chief Finance Officer, Mr. Dayo Omolokun, said shareholders should expect a better performance in the last half of the year compared to the period gone by.

"When you look at the top line growth, you realise that it was almost the same in the first and second quarters. Going forward, we expect that to improve into the lower part of double digits in the second half of the year," he said. — GB