KCB Group’s Profits Dip By 22% For 2020 Financial Year

KCB Group Plc has reported a net profit of 19.6 billion shillings for the full year ending December 2020, a 22 percent decline from the 25.2 billion shillings a year earlier.

The lender has attributed the decline in profits to higher provisions for loan losses and subdued economic activity associated with the COVID-19 pandemic hit business performance.

“The pandemic significantly affected our business across the markets we operate in, with most of them going into some degree of lockdown. The negative impact on the economy drastically reduced our customer’s ability to operate necessitating loan restructures,” said the Group CEO & MD Joshua Oigara.

Total income was up 14 percent to stand at 96.0 billion shillings, compared with 84.3 billion shillings reported in December 2019.

Funded income grew by 21 percent largely as a result of interest from Government securities which increased by 65 percent compared to the previous year.

Non-funded income remained flat to close at 28.1 billion shillings on the back of income from trading activities and strong foreign exchange earnings. The performance of non-funded income was partially subdued by the waiver on mobile transaction fees.

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“Despite the challenges, we strengthened our balance sheet to give us room to support our customers and stakeholders through the crisis while ring-fencing the business for future growth,” said Mr. Oigara.

Operating expenses (at 43.2 billion shillings) were up 12 percent mainly due to the full-year consolidation of the National Bank of Kenya (NBK), a subsidiary acquired at the end of 2019. Excluding NBK, expenses remained flat at KShs. 36.6 billion boosted by cost savings initiatives undertaken in the year.

The operating environment caused a significant increase in credit risks which pushed up the Group’s cost of risk leading to an increase in loan provisions to 27.1 billion shillings.

This deterioration in the economy also had a negative impact on non-performing loans (NPLs) book which rose to 96.6 billion shillings up from 63.4 billion shillings in 2019, with the NPL ratio rising to 14.7 percent, mainly due to COVID-19 related downgrades.

The Bank inched closer to crossing the 1 trillion shillings balance sheet mark, booking KShs.987.8 billion in assets, a 10 percent jump from the previous year, contributed by loan book growth, funded by increased customer deposits.

Net loans and advances were up 11 percent to close the period at 595.3 billion shillings while customer deposits were up 12 percent to 767.2 billion shillings. Shareholders’ equity grew 10percent from 129.7 billion shillings to 142.4 billion shillings on improved profit for the period.