KCB Group Plc profit after tax surged 6% to KShs. 19.2 billion for the nine months ending September 2019 on the back of significant growth in the loan book and non-funded income.
The net earnings increased from KShs. 18 billion, a similar period last year, driven by cost management initiatives across all businesses, said KCB Group CEO and MD, Joshua Oigara, on Wednesday while releasing the results.
Key Financial Highlights
“We had a strong quarter and the business witnessed growth across various segments. We made continued strong investments in our capabilities to serve customers better. The international businesses have continued to improve while our digital offerings are witnessing increased activity, giving the business impetus to continue growing,” said Mr Oigara. “Going forward, we are emphasizing on driving a more sustainable growth, excellent customer experience and diversification”
Total income was up 10% from KShs. 54.2 billion to KShs. 59.7 billion, with non-funded income increasing 16.9% attributable to the digital proposition, largely KCB M-PESA. Loans disbursed under this platform improved from KShs. 23 billion last year to KShs. 98 billion.
Net interest income expanded 7% to KShs. 38.7 billion from KShs. 36.3 billion primarily due to a growth in loan book and reduced cost of funds. The loan book closed at KShs. 486.4 billion from KShs. 435.3 billion, an improvement of 12%, reflecting the strong lending pipeline primarily driven by retail and corporate banking customer segment.
Fees and commissions increased by 28% to KShs. 14.1 billion on diversified income streams with enhanced investments in digital channels.
Year on year, total pre-provision operating expenses were down 1% from KShs. 26.8 billion to KShs 26.6 billion due to cost efficiency measures. Provisions for impairment increased to KShs 5.8 billion due to the increase in non-performing loans to total loan ratio which stood at 8.3%; well below the industry average of 12.6%.
The Group’s balance sheet expanded by 12% to KShs. 764.3 billion from KShs. 684.2 billion, with deposits up by 11% to KShs. 586.7 billion supported by continued strong growth in personal and transaction accounts and underpinning the Bank’s focus on providing superior customer service.
KCB Group maintained a strong capital base well within both internal and regulatory limits. The core capital as a proportion of total risk weighted assets closed the period at 18.1% against the Central Bank of Kenya statutory minimum of 10.5%. Total capital to risk-weighted assets stood at 19.5% against a regulatory minimum of 14.5%.
Despite a tough operating environment in the countries KCB operates in, the international business (excluding the Kenya subsidiary) posted improved performance. The combined after-tax profit increased 8% to KShs. 1.3 billion. Other than the Ugandan business, the rest of the 4 banking subsidiaries returned a profit.
This sustained overall growth story has seen the Group maintain its market leadership position. In September, KCB Group Plc was 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.
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.
On November 1, NBK announced profits before tax of KShs. 675 million shillings for the period ended September 30, 2019, representing a 45% growth from a similar period in 2018.