Standard Chartered Bank has announced a 10.3 per cent decline in its third quarter profit as losses from bond trading wiped out the gains of increased lending to households and companies. The bank said its net profits dropped to KES3.8bn in the nine months to September compared to KES4.3bn in the same period last year. The drop was attributed to lover valuation of bonds that saw it record a loss of 20mn on the securities it held for trading compared to a net gain of KES1.4bn in the same period last year. This helped wipe the 40 per cent increase in interest income from loans that grew to KES6.2bn as the banks grew its lending to KES94.3bn in September from KES55bn in September 2010. The drop in profit made it Kenya’s only top lender to report a drop in profit as its rivals led by Equity Bank, Barclays Bank and KCB reported double digits growth in profits. KCB’s net profit grew 45.5 per cent to KES6.4bn in the same period, Equity Bank (41.4 per cent), Co-operative bank (21.6 per cent) and Barclays bank (13 per cent)—a performance that made Standard Chartered bank Kenya’s fifth profitability bank from position two in 2009. The drop in earnings from bonds is tied to the rising interest rates in the primary bond market have risen steadily in the past few months to reach an average of 16 per cent. The high interest rates have seen the resale value of bonds plunge as investors seek to buy them cheaply to protect their margins from high inflation that is currently running at 18.9 pertcent. The bank’s holding of government securities stood at 25.7bn as at September compared to KES51.7bn in September 2010 — which also reduced interest income from government paper to KES1.7bn from KES2.8bn. Standard Chartered Bank share in Nairobi Securities Exchange (NSE) closed at KES179 yesterday from KES178 at Tuesday’s close, but has lost 29 per cent over the past six months. It joins the ranks of National Bank of Kenya—which also suffered from the bond valuations--and Family Bank in reporting profit drops. Family Bank net profit dropped 26 per cent to KES285mn while NBK’s dropped to KES1.2bn from to KES1.3bn.