KCB Group half year profit rises 5pc to Ksh.12.7 billion


KCB Group half year profit rises 5pc to Ksh.12.7 billion
KCB Group CEO Joshua Oigara converses with Group Chairman Andrew Kairu during the bank's release of its 2019 half year earnings on August 15. PHOTO | CITIZEN DIGITAL

In Summary

  • The marginal growth which however represents a slow-down in half year net growth year over year from an 18 percent rise in earnings in 2018 is on the back of increased lending and digitization.
  • The quest for efficiency through digitization and the deployment of third party infrastructure has supported the Group’s return from investing, defined in the marginal dip in the bank’s cost to income ratio to 45.7 percent.
  • KCB remains keen on regional expansion into the greater Eastern Africa region, a move that sits in-line with bank’s target of becoming the first Ksh.1 trillion asset-valued lender in the region.

KCB Group has announced a five percent growth in earnings for the first six months of the year to Ksh.12.7 billion.

The marginal growth, which however represents a slow-down in half-year net growth year-over-year from an 18 percent rise in earnings in 2018, is on the back of increased lending and digitization.

KCB net loans and advances to customers grew 14 percent  to Ksh.478.7 billion with the retail and corporate segment scooping up the lion share of the freed up credit.

The bank has however, against the tide of falling yields from government investments, pumped an additional Ksh.22.4 billion to the Treasury to represent a significant 20 percent jump in portfolio’s investment.

“This has effectively been the result of a balance in our investments. We still see suitable yields in mid and long term paper and hence chose to deploy our excess cash in government,” said KCB Group Chief Executive Officer Joshua Oigara.

The balance in the lending regime to both customers and government has been propped by growing efficiencies through the digitization of banking services to clients.

Agency, mobile and merchant banking has continued their dominance over the traditional brick and mortar channel, with banking halls now holding a mere five percent of KCB’s total transactions.

Mobile lending went up nearly five-fold in the first six months supported by the traction of the recently reinvigorated KCB Mpesa and the subsequent launch of Fuliza in the second half of 2018 as the respective channels push out Ksh. 66.7 billion and Ksh.27.4 billion in total, propping net mobile loans beyond the Ksh.100 billion mark.

The quest for efficiency through digitization and the deployment of third party infrastructure has supported the Group’s return from investing, defined in the marginal dip in the bank’s cost to income ratio (CIR) to 45.7 percent.

The improved CIR has been marked further by a reduction in the cost of funds by a slim 0.2 percent even on the back of increased interest expenses from elevated customer deposits which surged seven percent across the review period to Ksh.563.2 billion.

At the same-time, operational expenses minus costs on loan provisioning have held steady to sit below the inflation rate having risen marginally to 2.6 percent in the review period.

Moreover, the bank’s squeeze on expenses has been backed by improved asset quality as KCB’s share of non-performing loans (NPLs) slides to 7.8 percent from a higher rate of 8.4 percent in the first half of 2018.

KCB expects the balanced income mix and holds on costs to keep the bank earnings on a positive trajectory, organically, even as the group eyes the completion of its acquisition of the National Bank of Kenya (NBK) and the derivation of assets from Imperial Bank Limited in Receivership (IBLIR) to extend the scope for growth in the second half of 2019.

Further a field, the Group remains keen on regional expansion into the greater Eastern Africa region, a move that sits in-line with bank’s target of becoming the first Ksh.1 trillion asset-valued lender in the region.

“We see emerging opportunities in the region. Organic growth has served us well so far but with the observance of moves such as the liberalization of financial services in Ethiopia, we should begin looking at such markets differently,” said KCB Group Chairman Andrew Kairu.

The bank which has had a commercial office in Ethiopia has continued to grow its asset base year over year with the Group assets hitting Ksh.747 billion in H1 2019, a figure which is now only sits at Ksh.253 billion shy of the trillion shillings ambition.

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Story By Kepha Muiruri
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