Oral East Africa>Sheer size of KCB loan book supports jump in profits At the hut of the story

Written by Oral East Africa

KCB Bank Kenya posted a 32 percent jump in net profits for the nine months to September, leveraging its massive loan book to gain from interest rate increases on customer loans.

The lender saw interest incomes jump 36 percent to Kes69 billion despite loans advanced to customers dipping slightly from Kes729.3 billion to Kes726.9 billion.

KCB Bank also saw a sizeable jump in income from lending to the government, with securities bringing in Kes29.5 billion up from Kes22.2 billion in a similar period last year.

“The operating environment has been tough across all our markets, but we have continued to walk the journey with our customers while ensuring our key fundamentals remain strong. We are optimistic of a strong end of the year, riding on improving market conditions, solutioning for customers and tapping the great strength of our people,” said KCB Group CEO Paul Russo. instead deployed more money to government paper and increased its deposits with local and international banks six times.

Subsidiary support

The lender's parent, KCB Group, with diversified business with operations across East Africa and an asset base of Kes2 trillion benefitted from growth in retail sector lending that outpaced the impact from the appreciation of the shilling on the foreign currency-denominated loans.

Revenues increased by 22 percent to Kes142.9 billion, bolstered by both funded and non-funded lines across the subsidiaries.

The contribution by subsidiaries (excluding KCB Bank Kenya) improved during the period, closing at 36.6 percent in profit after tax and 34 percent in total assets, a demonstration of the continued benefits of diversification to other markets outside Kenya.

Cost of behemoth

KCB Group PLC recorded Kes45.8 billion in profit after tax for the first nine months of the year, a 49 percent growth from KShs.30.7 billion posted a similar period last year.

Despite the good rise in revenues, costs of operating the behemoth are also on the increase with total costs growing 11 percent driven by higher staff costs, technology expenses, spending related to business volumes and continued prudent provisioning for Non-Performing Loans (NPL).

The Group’s stock of NPLs stood at Kes215.3 billion, which saw the NPL ratio close the quarter at 18.5 percent, reflecting the economic conditions in different sectors across the markets.

To mitigate the effect of increased NPLs, provisions increased year on year by 12.2 percent. The Group continues to prioritize efforts to improve asset quality with various measures in place to reduce the NPL ratio both in the short and long-term.