Stanbic Bank Kenya has begun implementing a risk-based pricing strategy following approval from the Central Bank of Kenya in December. This approach sets the highest interest rate for risky borrowers at 19 percent. Under this system, clients can be charged up to 5 percentage points above the bank’s internal benchmark lending rate, which is presently at 13.12 percent. This benchmark rate fluctuates based on the prevailing Central Bank Rate.
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CEO Joshua Oigara stated that approximately 70 percent of the bank’s facilities had transitioned to risk-based pricing by the end of June. This move toward risk-based pricing aims to enhance market transparency, enabling borrowers to compare credit options from various banks with a clear understanding of the pricing structure. Oigara emphasized that this approach is about transparent pricing, resembling prime rates seen in other markets like the US, UK, and South Africa. Customers have the ability to challenge and compare interest rates offered by different lenders.
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The adoption of risk-based pricing positively influenced Stanbic Bank’s lending margins, resulting in a significant portion of the increase in its interest margins during the six-month period ending in June. Stanbic Holdings, the bank’s parent company, experienced a 47 percent growth in net profit to Kshs 7 billion, up from Kshs 4.7 billion. Total income for the group rose by 37.5 percent to Sh20.9 billion, with net interest income contributing significantly to this growth, reaching Kshs 12 billion. As part of the financial results, Stanbic Holdings decided to double its credit impairment charges to Kshs 2.4 billion from Kshs 1.2 billion, attributed to an adverse assessment of certain corporate borrowers. In response to the positive performance, the company’s board recommended the payment of an interim dividend of Kshs 1.15 per share by September 27 to shareholders registered as of September 4.
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