Leading Global Agencies assign Top Rating and Stable Outlook for KCB Group

By / Published September 30, 2015 | 6:30 am

KCB Group Named 2017 Kenya’s Bank of the Year

Global ratings agencies Standard & Poor’s (S&P) and Moody’s have assigned KCB Group top ratings and a stable outlook, affirming the Bank’s strong corporate franchise and its increasing penetration in the retail market.

Standard and Poor’s Ratings Services has given the Bank B+/B long-term and short-term credit rating with a stable outlook while Moody’s has assigned KCB a rating of B1 stable.

Last year, Kenya rode on a B+ and B1 with a stable outlook assigned by S&P and Moody’s respectively to issue a highly-sought US$2 Billion sovereign bond, it’s first in global markets.

The favourable rating, KCB’s management said, gives the bank bigger headroom to borrow funds for expansion and also affirms its growing role as a regional lender and a sustainable business.

In their assessment, the agencies said the rating reflect KCB’s credit strength, solid profitability metrics supported by strong domestic franchise, strong capital buffers, a well structured deposit-based funding model and high level of liquid assets.

“We believe KCB is well placed to maintain its revenue stability in the context of rising external shocks and weaker domestic economic growth. Whilst we anticipate credit losses to rise, we also expect the Group’s access to low-cost deposits and well established corporate lending franchise to support more stable credit losses and stronger margins than the industry average over the next 12-18 months,” said Standard & Poor’s in a statement.

KCB through its six operations—Kenya, Uganda, Tanzania, Rwanda, Burundi and South Sudan—operates as a diversified financial services provider, and is active across the East African region, targeting both retail and wholesale customer segments.

KCB Group Chief Executive Officer, Joshua Oigara, said: “The verdict by the two agencies is a clear confirmation of KCB’s story of a strong growth that is formed around building not only a profitable but also a sustainable business”. “We continue to leverage on innovation to simplify access to financial services, focus on customer experience and boosting capital buffers to build an African business for the future. We sit at the epicenter of shepherding Africa’s economic transformation agenda” he said.

“KCB’s strategic initiatives further support growth potential. The Bank has been strengthening its corporate product offering, management team, IT reliability and capacity in order to improve customer service and offer a more complete product suite to cross-sell to existing and new clients, ” said Moody’s in their report.

“We expect the Bank’s capital levels to remain strong amid a strong internal capital generation –supported by its strong profitability and a dividend payment ratio of 50% that will support the Bank’s domestic and regional growth,” the Moody’s report expounded.

In the first half of the year ending June 2015, KCB maintained a strong show on all prudential ratios with core capital to total risk weighted at 14.6% (CBK minimum-10.5%), total capital to total risk weighted assets at 15.9% (CBK minimum-14.5%), core capital to total deposits at 17.2% (CBK minimum-8%) and liquidity ratio at 32.2% (CBK minimum-20%).

The Group’s strong capital ratios which compare favourably to industry averages provides a buffer against unexpected shocks, said Mr Oigara adding the Bank now has a bigger headroom to fund larger and more projects in the East African region.

The ratings come two months after another rating agency Global Credit Ratings, an African-focused rating agency assigned KCB a stable rating of AA (KE) and A1+(KE) in the long term and short term respectively—currently the highest rating for a Kenyan bank accorded by GCR.

KCBs operations are concentrated in Kenya, but its regional operations are increasing. In 2014, the Bank derived about 20% of its revenues and 10% of total profits before tax from its subsidiaries in the region. The bank’s loan portfolio is fairly diversified across sectors, reflecting the diversification of the East African economy and its buoyant private sector.

KCB Group’s profit before tax grew 13% in the first half of the year ending June 2015—from KShs.11.7 billion to KShs.13.2 billion—riding on increased earnings from new business lines and the international business.

The rating agencies said a positive rating action on Kenya could lead to a similar rating action on KCB, providing that economic and industry risks are also improving, the group’s geographic and business diversification strengthens and there is an improvement in the group’s asset quality and loan loss coverage.

“We do not rate Kenyan banks above the sovereign rating because of the direct (high government bonds exposure) and indirect effects the sovereign would have on a bank’s operations in case of a financial stress” said S&P.

KCB Group has been on the forefront in offering innovative products and solutions that meet the dynamic demands of customers in the changing world of technology. The Bank’s recent partnership with mobile phone services provider Safaricom to offer loans through the mobile phone—KCB Mpesa— has been a game-changer in the financial services sector. Since the launch in March, the proposition has provided a fantastic banking experience to over 4 million new customers, with at least KShs. 4Billion disbursed in loans.

“We see this proposition as the next frontier for our growth and the best bet in deepening financial inclusion as the Bank continues to play a bigger role in the financial services sector across the East African region and beyond,” said Mr Oigara.

KCB’s 2015 Accolades

The Johannesburg-based Global Credit Ratings, an African-focused rating agency has affirmed the national scale ratings assigned to KCB of AA (KE) and A1+(KE) in the long term and short term respectively, currently the highest rating for a Kenyan bank accorded by GCR.
KCB Group featured prominently in the 2015 Banker’s Top 1000 World Bank Rankings, emerging position 833rd, up 13 places from last year among Top 1000 banks globally, in rankings released last month. In the Africa rankings, KCB was 6th in Africa by Return on Capital, and 6th in Africa by Return on Assets.
In June 2015, KCB Group CEO Joshua Oigara was listed by global news corporation Financial Times among the 25 Africans to watch in the coming years. Last month, Members of the Kenya Bankers Association (KBA), the banking industry umbrella body re-elected Mr Oigara as Chairman for a second term, underpinning the banker’s confidence in his stewardship.
Capital Finance International has feted KCB with the Best Green Bank – Kenya 2015 in its Green Banking Awards while Banker Africa has picked KCB for three top awards – Best Regional bank, Best Commercial Bank and Most Socially Responsible Bank.