Standard Chartered Bank Kenya Ltd. shrunk its holdings of the East African nation’s government securities by 52% at a time when the investments are drawing attractive returns.
The huge decline came as a surprise as the lender even took a trading loss of 2.3 billion shillings ($15 million) on the investments, Sterling Capital said in a note to clients after the bank’s nine-months earnings release.
“This strongly indicates that the parent company, having seen sovereign risks in countries like Ghana materialize, has sought to de-risk in Kenya should a similar situation arise,” Nairobi-based Sterling said.
African nations are increasingly vulnerable to defaults as a funding squeeze keeps them locked out of international markets. About eight of the economies need debt restructuring, according to the International Monetary Fund. Ghana and Zambia have sought emergency bailouts and debt restructuring and investors are skittish about other heavily-indebted economies including Kenya’s.
StanChart’s bigger rival in Kenya, Equity Group Holdings Ltd., increased its holdings of government securities during the period. Three-month Kenyan Treasury bills sold at 15.4% at the latest auction, the highest yield in about eight years.
StanChart tripled loan loss provisions in the nine months through September even as non-performing loans declined. Income from lending jumped 35% and non-interest income fell almost 7%.
The lender’s share price surged the most in 16 years in Nairobi after the earnings that included an interim dividend of 6 shillings per share.