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Stanbic Bank (Malawi) Limited’s profits-before-tax dropped from K827 million in 2003 to K113 million for the year ended December 31, 2004 during the bank’s first full year of operations as a member of the Standard Bank Group.
This represents a 635 percent drop in Stanbic’s pre-tax profits. Post tax profits, on the other hand, have also dropped by 593 percent from K541 million in 2003 to K78 million last year.
In 2002, while operating as Commercial Bank of Malawi (CBM) before the Standard Bank Group bought 60 percent stakes and changed its name to Stanbic in July 2003, the same bank made a profit-before-tax of K577 million.
Stanbic’s poor results could be attributed to a drop in the bank rate—the rate at which commercial banks borrow from the Central Bank—from 35 to 25 percent last June as evidenced by the drop in income from major operating activities.
The bank rate cut attracted reciprocal cuts in money market rates where most financial institutions yielded gold.
Reduced government borrowing has also contributed to the low rates and unpopularity of treasury bills—instruments treasury uses to borrow money.
The reduction in interest earnings is reflected under Stanbic’s interest and fees received column in the financial results published yesterday which show a drop from around K3.4 billion in 2003 to about K3 billion last year.
Cash and cash equivalents for the bank also dropped by about K800 million from K3.6 billion in 2003 to K2.8 billion last year.
Apart from earning higher interest from treasury bills, a source in the financial services industry said, banks—which control over half of the treasury bills market—also levy a charge of K1,700 on account holders for every transaction for treasury bills.
The results also show a decrease in net customer balances from K907 million in 2003 to K181 million last year.
The decline in net customer balances has coincided with Stanbic’s introduction of service charges for every transaction in January last year which drew dissatisfaction from its clients, most of whom shifted their accounts to rival banks.
Stanbic’s financial results dated 10 March 2005, co-signed by new board chairman Alex Chitsime and director Maria-Brigitta Msiska, attribute the bank’s reduced profitability to, among other things, a flat liability base which saw the bank not benefiting from any margins arising from increased investments or lending.
Stanbic also said that over the years due diligence and other credit reviews concentrated on higher value business banking and corporate accounts which saw lower value non-performing loans in the retail category not being fully recognised.
“These have now been systematically identified and provided for,” says Chitsime and Msiska in their joint report.
The results come barely one year after the former Stanbic Bank managing director Victor Mbewe, now Reserve Bank of Malawi governor, predicted a gloomy performance prospects for the bank because the national economy was not performing well.
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