In 2013 Stanbic Bank invested hugely on a new multimillion Pula core banking system. The investment increased the bank’s operating expenses by 15 percent to P438 million. SUNDAY STANDARD reporter KABELO SEITSHIRO spoke to Stanbic Managing Director (MD) Leina Gabaraane to find out how the bank will preserve its balance sheet going forward.
Gabaraane grudgingly acknowledged that the year 2014 was very challenging from both systemic pressures and internal processes point of view. However, he was quick to state that the systemic pressures emanated from the endowment effect of the 200 basis points cut in prime rate from early 2013, the moratorium on bank fees from the latter part of 2013 and the liquidity squeeze which became pronounced from the second half of the year, along with escalation in cost of marginal deposits.
“On the other hand, the internal pressures resulted from the usual processes of embedding a new core banking platform and the associated change management processes,” he said.
But Gabaraane is still confident that all is well as Stanbic’s strategic interventions, such as driving transactional product capabilities and payment platforms, helped to drive transactional liquidity based on floats. The bank’s full year financial results for 2014 shows that its profit after tax (PAT) went down from P241 million in 2013 to P91 million in 2014 while loans and advances to customers went up from P6.4 billion in 2013 to P6.5 billion in 2014.
At the same time, the bank’s income declined by nine percent from P813 million in 2013 to P666 million in 2014 while trading revenue remained resilient. Gabaraane said some of processes initially impacted customer experience adversely and hence affected the volume of transaction by customers.
“The initial first year costs in information technology-related services and operational learning costs also impacted the operating costs during the year,” he said.
Because Stanbic closely monitored its credit quality resulted in the level of impairment charges to the income statement improving by 15 percent.
“The systemic issue of the heavy debt burden on households is a key driver of the elevated levels of impairments,” said Gabaraane.
Asked on the squeeze on liquidity during the year, Gabaraane explained that a deliberate management decision resulted in the bank’s balance sheet growth being muted at two percent to P10.9 billion. For his part, Stanbic Chief Financial Officer (CFO), Sam Minta stated that the liquidity position on cash reserving, liquid asset ratio and loan to deposit ratio is prudently managed and remains within statutory limits. He added that despite the challenges, the bank remains committed to contributing to growth of the economy through a refreshed full value chain banking model that is focused on cash management and credit.
“New contemporary systems enabled channels are also being rolled out. Though these have had cost implications, the outlook for the retail banking capabilities looks positive,” said Minta.
“The outlook on 2015 is positive, in view of the interesting innovative product rollouts and the opportunities offered by the new core banking platform.”