KCB Group Plc has been ranked at position 717 in The Banker’s Top 1000 World Banks ranking for 2019, climbing nearly 100 places up, on the back of steady growth and strong balance sheet credentials.
The improvement from position 809 last year has also seen the Bank emerge 21 in Africa and number 1 in Eastern Africa.
KCB was Africa’s highest mover in the ranking, which tracks the health and wealth of the global banking sector, reaffirming the Bank’s credentials assigned by global rating agencies.
The survey which ranks the largest bank holding companies based on Tier 1 capital analyzed close to 2000 financial institutions, based on 2018 full year financial results.
The ranking includes data on more than $123 trillion of assets in 94 countries. Beyond Tier 1 Capital, it also includes additional data points (such as Pre-Tax Profits, Total Assets, Capital to Assets Ratio, Return on Capital, Return on Assets, BIS Total%, NPL%, Loans to Assets Ratio, RWA Density and Cost to Income Ratio) to provide an overall view of their soundness, profitability, asset quality and operational efficiency.
KCB’s improved ranking is attributed to the Bank’s strong capital base which is well within both internal and regulatory limits, solid business performance and a well-established corporate and retail franchise.
“We had a strong year and the business witnessed growth across various segments. The international businesses have continued to improve while our digital offerings have continued to witness increased activity,” said Joshua Oigara, the KCB Group CEO and MD.
Globally, banks had their best year ever despite all the challenges of tighter regulation, higher capital requirements, competition from fintechs and low interest rates in Europe and the US.
The Banker said low banking levels in emerging markets as well as deliberate investments in technology are allowing banks to grow their profits much quicker than in more advanced countries.
According to the Banker, the Kenyan banking sector remained strong on sustained assets growth with the top banks growing assets by as much as 10% and return on assets by 115 bps during the period under review. Kenya did not have a presence in the Top 1000 ranking until 2012 but posted the second best return on assets in Africa of 3.06% last year.
In its latest review, rating firm S&P Global Ratings affirmed its ‘B+/B’ long- and short-term issuer credit ratings on KCB, with a stable outlook. S&P said the Bank is well placed to maintain its revenue stability in the current economic environment, reflecting the country’s relatively well-diversified economic base and strong private sector.
The acquisition of National Bank of Kenya (NBK) is expected to further cement KCB’s position in the domestic banking sector and strengthens its ability to access more business flows.
“We believe that consumer loans will continue to contribute to asset growth, supported by Kenya’s expanding middle class, advanced mobile banking solutions, and pending amendments related to the interest-rate caps. The outlook is stable because we expect the bank’s business and financial profiles will remain broadly unchanged over the next 12 months,” said S&P in the rating decision.
“We expect the bank will focus its efforts on trade flows, non-funded income, and mobile banking in the region to mitigate the economic challenges in many EAC countries,” it said.
KCB Group PLC posted a 5% growth in after tax profit to KShs. 12.7 billion for the first half of 2019 ending June. The improvement in earnings from KShs12.1 billion reported same period last year was as a result of a significant growth in loan book and increased mobile channel activity.
The Group’s balance sheet increased by 12% to KShs. 746.5 billion, with deposits up 7% to KShs. 563.2 billion supported by continued strong growth in personal and transaction accounts and underpinning the Bank’s focus on providing superior customer service. The loan book surged 14% to KShs. 478.7 billion, reflecting the strong lending pipeline primarily driven by the retail and corporate banking customer segment.
The ratio of non-performing loans to total loans declined to 7.8% from 8.4%, well below the industry average of 12.7%. The core capital as a proportion of total risk weighted assets closed the period at 18.0% against the Central Bank of Kenya statutory minimum of 10.5%. Total capital to risk-weighted assets stood at 19.4% against a regulatory minimum of 14.5%.