KCB Group posts 6.59 Billion Shillings in Q1 Pre-tax Profit

KCB Group posted a pre-tax profit of 6.59 billion shillings in the first quarter ending March 31, 2017. In the full year 2016, the Group reported 3.4 billion shillings loss on net monetary position due to the accounting for hyperinflation in South Sudan. This entire amount was accounted for in Q4 2016. Adjusting for the specific loss on net monetary position attributable to Q1 2016 translates to a 5 percent growth in pre-tax profit in Q1 2017 over the same period in 2016.

The adverse impact of the interest capping law was cushioned by a 27 percent reduction in interest expense, 20 percent growth in non-interest income and prudent cost management that limited cost growth to below inflation.

The Group’s non-interest income was up 20.3 percent from 4.6 billion shillings in the first quarter of 2016 to 5.6 billion shillings within the same period this year, underscoring the growing importance of income derived from alternative revenue channels.

KCB Group CEO and MD Joshua Oigara said that the full effect of the law capping interest rates resulted in an interest income dip of 12 percent during the quarter from 16.0 billion shillings in Q1 2016 to 14.1 billion shillings this year. Interest expense declined by 27 percent from 5.2 billion shillings to 3.8 billion shillings occasioned by reduced cost of funds. Further, the Group posted a significant improvement in Forex income which was up 72.1 percent; total assets up by 8.8 percent and shareholder funds up 20.6 percent.

“We have witnessed an increasingly challenging operating environment across all markets. In Kenya, the interest rate caps have made it difficult to price for risk whereas some of our subsidiaries are experiencing high inflation and the shortage of foreign currency,” said Mr. Oigara.

KCB Group’s non-interest income currently accounts for 35 percent of the Group’s total operating income and is expected to be the growth driver going forward. The Group has pegged its future on its Fintech strategy that rides on a digital platform to provide seamless services for its customers. “The future lies in leveraging technology to drive efficiencies in our operations in order to serve our customers better with relevant products that meet their expectations,” said Mr. Oigara

KCB Group continues to face challenges in South Sudan, due to the hyperinflation situation in the economy. The continued depreciation of the currency (South Sudanese Pound) has had a negative impact on our results. “The Group continues to monitor South Sudan’s overall performance and appropriate optimization measures are being executed,” said Mr. Oigara.

KCB has made significant advances in adopting technology resulting to more than 79 percent of the transactions performed outside the branches. Mobile banking transactions have increased by 37 percent, Agency banking increased by 50 percent and Point of Sale transactions increased by 33 percent in Q1 2017 compared to the same period last year. Over the same period, branch transactions have reduced by 27 percent.