Standard Chartered Bank Kenya Limited Annual Report 2015
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Standard Chartered Bank Kenya Limited Annual Report 2015 Driving investment, trade and the creation of wealth in Kenya sc.com/ke Standard Chartered Bank Kenya Limited is regulated by the Central Bank of Kenya. Business Review Corporate Governance Financial Statements and Notes Others 1 3 4 5 34 36 38 39 40 46 47 48 49 50 51 52 54 56 57 11 19 114 117 s t n e t n o C Other Meeting General Annual the of Agenda and Notice Proxy of Form Financial Statements and Notes and Statements Financial Report Auditors' Independent Executive Committee Executive Information Statutory and Board The Directors the of Report Governance Corporate on Statement Responsibilities Directors’ of Statement Statement Income Consolidated Income Comprehensive Other of Statement Consolidated Position Financial of Statement Consolidated Position Financial of Statement Company Equity in Changes of Statement Consolidated Equity in Changes of Statement Company Flows Cash of Statement Consolidated Statements Financial Consolidated the to Notes Corporate Governance Corporate Directors of Board Business Review Business Highlights Performance Five Year Summary Year Five Statement Board's the to Chair Statement Officer’s Executive Chief Review Sustainability Contents sc.com/ke2 Standard Chartered Bank Kenya Limited Annual Report 2015 Standard Chartered Bank Kenya Limited is regulated by the Central Bank of Kenya. B Performance Highlights u s i n Strong foundations e s s R e v i e w Operang Income Profit Before Taxaon Total Assets KShs m KShs m KShs m 5% Basic earnings per share Dividend per share Gross advances to deposits ratio % KShs KShs 33.21 17.00 17.00 29.42 85 (40%) 82 19.97 72 14.50 2013 2014 2015 2013 2014 2015 2013 2014 2015 Return on capital employed % Liquidity rao % Capital KShs m 40,147 36,288 6,888 7,344 54 30,721 33,259 29 28 46 4,890 (38%) 28,944 25,831 38 Tier 1 17 Tier 2 2013 2014 2015 2013 2014 2015 2013 2014 2015 Operang income by client segment Profit before taxaon by client segment Total assets by client segment KShs m KShs m (excluding unallocated assets) KShs m Corporate & Retail Banking Corporate & Retail Instuonal Retail Banking Instuonal Banking 58,211 10,853 Banking Banking 27% 4,449 7,023 12,286 49% 213,389 44% 9,160 76% 24,814 49% Commercial 5% 68% Banking 10,021 25% Corporate & Instuonal 7% Commercial Banking Banking 145,157 Commercial Banking (2,312) 1,675 Non-financial Highlights Employees Branches ATMs 1,881 39 98 2014: 2,048 2013: 1,850 2014: 37 2013: 37 2014: 95 2013: 98 3 Five Year Summary 2015 2014 2013 2012 2011 Income Statement KShs ‘000 KShs ‘000 KShs ‘000 KShs ‘000 KShs ‘000 Operating income 24,814,354 25,587,016 23,417,444 20,671,436 15,913,511 Impairment losses on loans and advances (4,591,647) (1,047,430) (783,050) (716,650) (412,739) Operating expenses (11,062,775) (10,193,605) (9,279,429) (8,398,595) (7,245,637) Profit before taxation 9,159,932 14,345,981 13,354,965 11,556,191 8,255,135 Taxation (2,817,505) (3,909,801) (4,092,044) (3,486,658) (2,418,314) Profit after taxation 6,342,427 10,436,180 9,262,921 8,069,533 5,836,821 Information per ordinary share Basic earnings per share (EPS) (2011 Restated) 19.97 33.21 29.42 26.60 19.28 Dividend per share on each ordinary share (DPS) 17.00 17.00 14.50 12.50 11.00 Statement of Financial Position Loans and advances to customers (gross) 123,409,820 126,275,274 131,965,961 114,534,987 97,417,343 Impairment losses on loans and advances (8,284,393) (3,526,041) (2,293,957) (1,840,464) (1,319,520) Government securities 73,126,068 58,215,860 55,642,528 45,320,968 24,584,908 Other assets 45,713,952 41,530,731 35,076,648 37,337,265 43,363,893 Total assets 233,965,447 222,495,824 220,391,180 195,352,756 164,046,624 Deposits from customers 172,036,056 154,066,931 154,720,011 140,524,846 122,323,049 Other liabilities 20,677,606 27,770,719 29,464,768 24,075,096 21,029,119 Total liabilities 192,713,662 181,837,650 184,184,779 164,599,942 143,352,168 Net assets 41,251,785 40,658,174 36,206,401 30,752,814 20,694,456 Shareholders’ funds 41,251,785 40,658,174 36,206,401 30,752,814 20,694,456 Ratios Cost income ratio 45% 40% 40% 41% 46% Return on capital employed 17% 28% 29% 30% 33% Impairment charge/gross loans and advances 4% 1% 1% 1% 1% Gross loans and advances to deposits ratio 72% 82% 85% 82% 80% Gross non performing loans and advances/total gross loans and advances 12% 9% 3% 2% 1% Core capital/total deposit liabilities 19% 19% 17% 15% 12% Core capital/total risk weighted assets 18% 16% 17% 16% 12% Total capital/total risk weighted assets 21% 20% 21% 18% 14% 4 Standard Chartered Bank Kenya Limited Annual Report 2015 B u s Chair to the Board's Statement i n e s s R e v i e w The Board is confident in “the Company's compelling opportunities and the changes we have made will reposition the Company for the future.” 2015 was indeed a very challenging year for Standard market remained stable anchored by strong Diaspora Chartered Bank as a Group. Our financial results are a remittances, and a narrowing current account deficit due reflection of a volatile macro-economic environment as to a lower oil import bill coupled with improved exports. well as the effects of deliberate management actions. The Central Bank of Kenya (CBK) maintained tight In November 2015, the Standard Chartered Bank Group monetary policies in the second half of the year. The ("SCB Group") announced a refreshed strategy which Central Bank Rate increased to 11.5 per cent from 10 per prioritises returns and allocation of capital and investment cent in July 2015, and similarly, the Kenya Banks’ in areas in which we have long term competitive Reference Rate increased to 9.87 per cent from 8.54 per advantage. Our aim is to build on foundations of a strong cent in the same month. Both rates have since remained balance sheet, cost efficiencies as well as a vibrant and unchanged. This has mitigated internal and external ethical organisational culture. shocks and led to a relative stability of domestic prices and of the exchange rate. Kenya’s financial sector continues to In Kenya, in a bid to turn around the performance demonstrate strong growth as a result of improvements in trajectory of the Company, we refreshed our strategy the information and communication technologies, focused on growing the balance sheet and building a macroeconomic stability and domestic expansion due to sustained momentum into 2016 and one that is responsive the devolved level of government and regional expansion to local conditions. to new frontiers. Operating Environment Financial Results Global economic growth remained subdued in 2015, In 2015, Standard Chartered’s results reflect a challenging slowing to 2.4 per cent. A slump in commodity prices operating environment as well as the effects of the resulted in the weakening of strong economies, notably restructuring from the refreshed SCB Group strategy. China and created a harsh operating environment. Highlights: The banking sector’s fortunes are tied to the economic • Profit before taxation declined 36 per cent to environment both domestically and globally. The global KShs 9.2 billion (2014: KShs 14.3 billion); sentiment impacted Kenya’s banking sector through the depreciation of the Kenya shilling (KShs) against the US • Total revenue decreased by 3 per cent to dollar (USD) due to portfolio outflows out of the Nairobi KShs 24.8 billion (2014: KShs 25.6 billion). The Securities Exchange (NSE) predominantly by foreign increase in interest income and fee & commission investors. This led to a spike in interest rates in October income was offset by a drop in other income; 2015. The aggressive spike in interest rates increased the attractiveness of KShs assets and led to an inflow of • Net interest income increased to KShs 17.6 billion foreign currency that strengthened the KShs against the (2014: KShs 17.3 billion). USD. Towards the close of the year, the foreign exchange 5 Chair to the Board Statement (Continued) • Non-interest income decreased by 13 per cent to Corporate Governance KShs 7.2 billion (2014: KShs 8.3 billion) due to a The Board upholds high standards of corporate one-off property sale in 2014. Excluding the one-off in governance which we believe is key to delivering 2014, non interest income was up 7 per cent. sustainable shareholder value and the Company's long term success. • Net bad debt charge increased from KShs 1.0 billion to KShs 4.6 billion. The portfolio has been reviewed To achieve this, the Board provided leadership through extensively and we continue to have a proactive oversight of the Company strategy execution, internal approach to risk management; controls, risk management and people management. In addition, the Board spearheaded the Company’s • Total operating costs grew by 9 per cent to restructuring process through the review of the new KShs 11.1 billion (2014: KShs 10.2 billion) as we structure and approving the creation of new internal continued to invest in new business capabilities, committees to support the new structure.