KCB Group Q3 Pre-Tax Profit Grows 18.3 Percent to 22.9 Billion Shillings

Strong loan growth in Kenya Business and prudent costs management initiatives helped push up Kenya Commercial Bank Group’s pretax profits 18.3 percent in the third quarter of 2016.

Profit before tax for the nine months ending September 30, 2016 rose to 22.9 billion shillings from 19.3 billion shillings in a similar period last year, KCB Group CEO and MD Joshua Oigara said on Tuesday.

The Group recorded a 27 percent growth in Net Interest Income, driven by asset book growth, better yields and reduction in cost of funds.

“The performance reflects continued resilience across the seven markets that we operate in. The business benefitted largely from a diversified income structure, prudent cost management and deliberate investments in infrastructure and digital channels,” said Mr. Oigara while releasing the results.

The Q3 financials showed that total expenses increased by 7 percent, to support business growth, investment in channels and infrastructure.

Provisions for bad debts were down 11 percent to 3.4 billion shillings in September 2016. Overall Group gross nonperforming loans declined by 1.9 billion shillings on a quarter to quarter basis on the back of enhanced Credit processes and recoveries.

In the month of August 2016, the bank successfully re-implemented an upgrade of its core banking system T24 to boost operational efficiencies, facilitate technology innovation, and allow for easier interface with other platforms and increase reliability.

“The new system offers increased functionality and great customer experience and is a firm base for our journey towards a service oriented architecture in line with our customer strategy,” added the Group CEO.

The Group’s total assets declined by 6 percent year on year attributed to currency devaluation in South Sudan market. Total assets without the South Sudan component increased by 10 percent.

The pressure on the South Sudan Pound continues to grow since December 2015 when the currency was floated.

Mr. Oigara said the Group’s asset book is poised to grow steadily as the Bank makes bigger investments in technology systems and digital platforms to support the business while consolidating the international business.

“We see the new fin-tech capabilities giving us a strong business position and stable performance in the coming years as the future of banking shifts into digital,” said Mr. Oigara.

The financials indicate that net loans and advances were up 5 percent from 347.6 billion shillings to 364.5 billion shillings during the period.

This growth was largely driven by the Kenya business which registered an 8 percent growth. KCB’s loan portfolio is fairly diversified across sectors, reflecting the variety of the Kenyan economy and its buoyant private sector.

The devaluation of the South Sudan pound negatively impacted Group deposits leading to a 7 percent decline. However, KCB Bank Kenya Customer deposits had an impressive growth of 14 percent as a result of customers seeking to place their money where they felt safe.

The number of users currently on mobile phone stands at 10.2 million, while the number of mobile accounts grew by 98 percent from 4.3 million in Quarter 3, 2015 to 8.3 million in a similar period this year.

The registered customers on mobile make up over 75 percent of the total customer base in the Bank. Over 17 billion shillings has been disbursed in loans for the past 18 months. Mobile loans hit an average of 80,000 per day on daily requests in the month of September 2016 offering an efficient and trusted platform for our customers.

“The uptake of non-branch channels has contributed 73 percent of our total Bank transactions in comparison to last year at 62 percent with mobile contributing the highest from 29 percent to 35 percent in line with our digital financial services strategy,” said Oigara.

Late October, global rating agency Standard & Poor’s (S&P) revised KCB Bank’s rating to ‘B+/B’ and outlook from negative to stable in line with a similar outlook for Kenya. In its latest assessment of the region’s biggest bank by asset and profitability, S&P said that the positive rating and improved outlook is supported by solid profitability metrics, a strong domestic retail and corporate franchise, strong capital buffers, a well-structured deposit-based funding model and high level of liquid assets.

The Bank maintained a strong show on all prudential ratios with core capital to total risk weighted assets at 14.7 percent (CBK minimum-10.5 percent), total capital to total risk weighted assets at 15.9 percent (CBK minimum-14.5 percent).