Standard Bank plc shareholders on Friday took the management to task to explain why the bank’s profitability slumped by 13 percent in 2018 compared to the previous year.
The Malawi Stock Exchange (MSE)-listed bank’s profitability went down from K12 billion in 2017 to K10.5 billion in 2018, according to audited financial results for the year ended December 31 2018.
Standard Bank plc chief financial officer Temwani Simwaka told shareholders at the bank’s annual general meeting in Lilongwe that credit losses subdued the bank’s profitability.
She explained that the bank also experienced revenue decline owing to the Reserve Bank of Malawi’s policy rate cut, which means that despite registering increased lending to customers, income went down.
“In 2017, we had K6 billion credit losses while in 2018 we had a loss of K4 billion.
“We experienced a drop on interest income year-on-year in spite of the balance sheet growth. So, our lending to customers went up year-on-year but because of the decline in terms of interest rates, our income levels went down,” she said.
Simwaka said the bank maintained the operating costs and, going forward, “we are working around investing for the future to ensure the bank business is sustainable”.
In terms of interest rates, the bank said it expects them to continue going down, adding that it has capacity to lend more and it is also streamlining credit processes to ensure the bank does not suffer large hits like in the past two years.
Simwaka said the bank is continuously adopting new technologies to improve its services by automating its platforms to make them more user-friendly.
Some shareholders also queried the bank on reduction in staffing levels and Simwaka explained that in 2017, the bank hired more staff specifically for the new core banking system implementation.
He said because of this, the bank was running two parallel systems that were later merged and some employees had to go after finishing their specific tasks.
RBM has been cutting its policy rate in recent times, a development that has been affecting financial institutions’ revenue projections as they also adjust their interest rates as per the regulator’s directive.
The policy rate is currently at 13.5 percent, and commercial banks are pegging their interest rates at between 13.5 percent and 25 percent.
RBM spokesperson Mbane Ngwira last week said the policy rate may have affected financial institutions differently based on the nature of their operational framework.
The policy rate, the rate at which commercial banks borrow from RBM as the lender of last resort, was revised downwards from 14.5 percent to 13.5 percent in January this year.