KCB First-Half Profit Rises as Kenyan Lender Cuts Provisions
05 August 2016, 17:55
Nairobi - KCB Group Ltd., Kenya’s biggest bank by assets, boosted first-half
profit by 14 percent as earnings from lending increased and after
setting aside less money for credit-related losses.
Net income in
the six months through June rose to 10.5 billion shillings ($103.6
million) compared with 9.2 billion shillings a year earlier, the
Nairobi-based lender said in a statement on Thursday. Net interest
income, the revenue generated from the difference between what banks
charge for loans and pay for funding, jumped 16 percent to 22.5 billion
KCB kept cost increases below inflation while lowering
provisions for soured loans 20 percent as it put in place measures to
reverse a 36 percent surge in non-performing loans over the period,
Chief Executive Officer Joshua Oigara told reporters. The company’s
operations in Tanzania, South Sudan, Uganda, Rwanda and Ethiopia also
helped lift earnings, while an expansion into investment banking,
insurance and Islamic banking started reaping rewards, he said.
are seeing a consistently growing business that is anchored on improved
efficiency, diversified sources of income and a strong loan book
growth,” Oigara said. “Looking ahead, focus is on enhancing growth
momentum in the key markets across the region during the second half of
the year. The Kenya business continues to show strong momentum and so
are new business lines like Bancassurance, KCB Capital and Sahl
The lender will boost its Tier 2
capital by using $75 million of $200 million it has available from
commitments it received through a “capital-raising exercise,” the CEO
said. It will then embark on a loan program over the next four years to
strengthen operations in the seven countries in which it operates, with
Rwanda and Kenya seen as the most promising, he said.
swung between gains and losses to trade 0.8 percent higher at 31.75
shillings as of 2:40 p.m. in Nairobi, giving KCB a market value of 97
billion shillings. The shares have declined 27 percent this year,
compared with a 3.6 percent drop in the FTSE NSE Kenya 25 Index.
lender’s NPL ratio worsened to 8.9 percent of the bank’s book, from 6.6
percent previously. The industry’s average non-performing loans ratio
deteriorated to 6.8 percent by the end of 2015, from 5.6 percent a year
earlier, partly due to delays in payments to suppliers and contractors,
according to a banking supervision report by the regulator.
very confident about delivering 15 percent year-on-year returns for
this year, which is well within our target, and addressing our
non-performing loans,” Oigara said.
Bad loans were driven by three
key accounts; two in construction and a government body, Chief
Financial Officer Lawrence Kimathi said at a presentation. All three
loans were fully backed by good-quality collateral and their recovery is
in progress, he said.
The three large non-performing clients
accounted for 19 billion shillings of the the group’s corporate loan
book of 150 billion shillings which increased the lender’s overall
non-performing loan book by 5200 basis points, Oigara said in an
“If you look at our retail business, our non-performing loan ratio is
2 percent, our corporate book non-performing loan ratio is 12 percent,
that should be the best performing book.” Oigara said. “We’ve got one
large client of ours who is 90 days in arrears and we have provided for
him 20 percent, in line with prudential guidelines. Two of them we
expect to recover in current quarter, and one of them in the last
quarter of the year so by December we believe we should be at a 6.5 NPL
ratio.” he said.
Plans for a rights offer to raise as much as 10
billion shillings this year have been shelved, Oigara said. He didn’t
give a new schedule.