Stanbic Kenya Expects Stronger Second-Half Earnings as Loan Demand Recovers

Nairobi—Kenya's Stanbic Holdings expects earnings growth to strengthen in the second half of the year as lower interest rates stimulate economic activity and drive increased demand for loans, Chief Executive Officer Joshua Oigara told Reuters.

The lender reported a sharp reduction in its interim dividend after falling interest rates squeezed net interest margins. However, Oigara said growing borrowing demand from small and medium-sized enterprises (SMEs) and retail customers should provide stronger momentum in the months ahead.

Stanbic's first-half deposits increased 28%, while loans grew 24%, reflecting improved investment activity and stronger economic conditions.

Infrastructure and Agriculture Drive Demand

Oigara identified road construction, manufacturing and agriculture among the sectors supporting increased demand for credit.

The bank expects stronger revenue growth during the second half and anticipates a higher full-year dividend, despite the pressure that lower lending rates have placed on margins.

Stanbic’s first-half post-tax profit increased just 1%, highlighting the impact of declining interest rates on banking income.

Kenya's central bank has cut interest rates 10 consecutive times through February, while a new loan-pricing formula has contributed to lower borrowing costs.

Regional Competition Intensifies

Kenya’s banking sector has also attracted financial institutions from other African markets, including Nigeria, as lenders seek to benefit from the country's long-term economic and regional growth prospects.

Asked about reports that Stanbic had previously explored an acquisition of NCBA Bank before Nedbank’s acquisition, Oigara declined to comment. He said the lender remains focused on organic growth and currently has no merger or acquisition targets.

Stanbic's outlook points to an important shift for Kenya’s banking sector: lower interest rates may initially pressure bank margins but could ultimately support earnings through stronger credit growth and economic activity.

If infrastructure, manufacturing and agricultural investment continues to expand, rising loan demand could help offset some of the margin compression experienced during the rate-cutting cycle.

Source: Reuters

Reporting: Duncan Miriri

Editing: Libby George & Louise Heavens