Kenya Contributed 63.3% To KCB Group’s Profit Before Tax

Soko Directory Team

2 years ago

KCB Group (KCB) FY23 net earnings printed at KES 11.66 per share (-8.26%%y/y). Kenya contributed to 63.3% of the nominal year-on-year growth in Profit before tax.

Although Kenya continued to power earnings in the year, revenue growth in the subsidiaries outpaced that of KCB Bank Kenya with the Uganda subsidiary posting revenue growth of 54%y/y to KES 4.4Bn and the Tanzanian subsidiary posting revenue growth of 52% y/y to KES 6.1Bn.

The Kenya subsidiaries were able to post a 27%y/y increase in non-banking revenue to KES 1.4Bn and KCB Bank Kenya posted revenue growth of 6%y/y to KES 98.1Bn. National Bank of Kenya was the only subsidiary to post a 2% y/y decline in revenue to KES 11.4B.

Overall, group earnings during the year were driven by:

A 33.9%y/y growth in non-funded income. Specifically, other fees and commission income increased by 118.8% during the year, accounting for nearly half of the total non-funded income portfolio.
A 42.82%y/y growth in funded income. Annuity income from investment securities grew by 29.8%y/y as the bank continued to allocate liquidity to government debt. Investment securities to total assets stood at 18.3%.
Interest on net loans and advances increased by 44.5%y/y bolstered by the value of gross loans witnessing an increase of 24.3%y/y reaching to KES 1.2Tn mark as the bank increases market penetration mainly through lending to corporate and retail clients.

Loan book growth during the year was optimal (+27%y/y), largely driven by both the corporate and retail segments. The corporate book accounts grew by KES146 Bn y/y while retail accounts grew by KES 75Bn in the same period. Mortgages witnessed a marginal increase of KES 14Bn. On the downside, we made the following observations:

Gross NPLs ratio remained unchanged y/y from 17.3% in FY22 to 17.3% in FY23. This comes as the current banking industry NPLs average increased to 14.8%. The sustained level in the NPL ratios is attributable to an increase in gross loans as well as a decrease in NPLs in the corporate segment. However, the value of gross NPLs witnessed an increase to KES 208.3Bn from KES 161.2Bn in FY22. FX impact was the key driver in the increase of NPL stock with a contribution of 48% equating to a KES 23Bn FX impact on gross NPL. Downgrades in loans and advances amounted to KES55.9Bn. The bank is expected to continue implementing actions whose main focus is to attain and sustain healthy asset quality by resolving NPL with the FY24 target ratio being 13.5%.
Balance sheet funding costs rose 39.3%y/y, which reflected the bank’s funding mix that saw the net interest margin decline to 6.6% from 6.7% in FY22. During the period, 60% of customer deposits were demand deposits with savings witnessing a 700bps increase to 13% of total deposits with the bank having recorded a strong 48.9%y/y growth in customer deposits during the year.