Stanbic pays Sh944 million in Franchise Fees

In the year that ended in December, Stanbic Holdings sent Sh944 million in franchise fees to its South African parent company Standard Bank, an increase of 28.9% from the Sh732 million it sent in the preceding year.

The Nairobi Securities Exchange-listed company withheld more information about the payouts, but these fees—rare among local listed banks—are typically given to the franchisee for assistance with the business, access to its brand, or use of its marketing resources.

In its most recent annual report, Stanbic made the payments to the Johannesburg-based business public.

Franchise fees increased the total sums paid to Standard Bank during the review period from Sh1.45 billion to Sh1.92 billion, an increase.

The largest bank in Africa also increased its charge for IT services to Sh595 million from Sh574 million for its Kenyan subsidiary. Additionally, “other operating costs” were charged to Stanbic for Sh387 million, more than doubling from Sh149 million.

For its subsidiaries, Standard Bank combines products and lending opportunities from various markets. Additionally, it contributes to Patrick Mweheire’s compensation as chief executive of Stanbic.

“The chief executive also has an oversight role over the region and therefore his costs are borne by Stanbic Holdings Plc and the Standard Bank of South Africa. The costs disclosed above relate to the share of Stanbic Holdings Plc,” Stanbic said in the remuneration report.

The multinational, which owns a controlling 74.92 percent of the local business, is expected to generate dividends of Sh3.7 billion.

By purchasing a total of 59 million shares in June of last year for more than Sh5 billion through a combination of a tender offer and on-market purchases, it increased its ownership to the current level.

After the net profit for the year ended in December 2022 increased by 26% to reach the highest level in the lender’s history, Stanbic increased dividend payments by 40%.

As a result of increased lending and a rebound in non-funded income, net earnings increased to Sh9.06 billion from the Sh7.21 billion reported in the previous year.

Loans and advances to customers increased by Sh37.5 billion to reach Sh266.83 billion at the end of December, increasing net interest income from Sh14.4 billion to Sh18.9 billion.

To support the net earnings, non-interest income, which is primarily comprised of fees and commissions, increased from Sh10.62 billion to Sh13.14 billion.

However, due in part to increased provisioning for non-performing loans, the group’s operating costs increased from Sh12.7 billion to Sh14.97 billion.