KCB rides on loan book to post Sh25b net profit

Friday, March 13th, 2020 00:00 | By
KCB Group chief executive Joshua Oigara (left) with KCB Group chairman Andrew Kairu (centre) and KCB Group chief finance officer Lawrence Kimathi during the release of the 2019 Full Year Financial results in Nairobi yesterday. Photo/PD/ALICE MBURU

Zachary Ochuodho @zachuodho

Kenya’s top lender by assets, KCB Group posted a five per cent increase in after tax profit to Sh25.2 billion for the year ended 2019, despite a tough business environment.

The bank, which had earned Sh23.9 billion in 2018, yesterday said the performance is on account of a strong income growth in the Kenyan business and international subsidiaries.

KCB Group chief executive and managing director Joshua Oigara said the business remained resilient during the period despite the challenging economic conditions witnessed in the various markets and the wider global economy.

Earnings per share at the group, which also operates in neighbouring Uganda, Tanzania, Rwanda, Burundi, and South Sudan, increased to Sh8.11 during the period, from Sh7.83 shillings earned last year

“The East African region continued to face various downside risks that ranged from adverse weather patterns to stress from currency fluctuations and the pressure from oil imports,” he said. 

Funded income

Oigara said all business lines for the period were strong on both funded and non-funded income as cost control, operational efficiency and driving excellent customer experience remained a top priority.

He said both the Kenya business and the international subsidiaries delivered strong income growth.

Acquisition of National Bank of Kenya (NBK) — a transaction that was finalised in the last quarter of 2019 — solidified the Group’s base from a revenue and balance sheet position.

Chief financial officer Lawrence Kimathi said the total income increased 17 per cent to Sh84.3 billion while operating expenses grew much slower by 10 per cent, resulting in an improved cost to income ratio of 45.7 per cent, compared to 48.7 per cent the previous year.

Net interest income expanded 15 per cent to Sh56.1 billion from Sh48.8 billion primarily due to a 17 per cent growth in the loan book, digital lending and additional interest income from NBK.

Diversified income

“Fees and commissions surged 39 per cent to Sh19.8 billion on diversified income streams,” he added. He said enhanced investments in digital channels pushed non-funded income up 22.6 per cent to Sh28.2 billion from Sh23 billion in 2018.

“Our investments in diversified channels are giving our customers a means to access banking services conveniently, at a competitive price and in line with our purpose of simplifying their world to enable their progress,” said Oigara.

During the year under review, the number of non-bank transactions increased to 97 per cent with a majority of them conducted via mobile devices. Mobile loans advanced increased to Sh212 billion from Sh54 billion in 2018.

Cumulative disbursement via mobile over the past five years totalled Sh319 billion with the ratio of non-performing loans (NPLs) to total loan book increasing to 10.9 per cent (7.4 per cent excluding NBK), well below the industry average of 12 per cent.

As a result, provisions for impairment increased to Sh8.9 billion from Sh2.9 billion. The key sectors driving this deterioration in asset quality were trade, tourism and manufacturing sectors within the corporate banking book and on the mobile loan portfolio.

The stock of NPLs increased to Sh63.4 billion (Sh38.2billion excluding NBK) up from Sh32.7 billion in 2018, following consolidation with NBK. Meanwhile, NBK operating income increased by five per cent to Sh8.4 billion, as balance sheet hits Sh111.9 billion.

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