Kenya's KCB warns on bad debts, puts off cash call
05 August 2016, 16:22
Nairobi (Reuters) - KCB Group, Kenya's
largest bank by assets, warned on Thursday of rising bad debts
in the industry and postponed plans to raise cash through a
The group, which also operates in Rwanda, Burundi, Tanzania,
Uganda and South Sudan, also reported pretax profit rose 14
percent in the first half of this year to 15.1 billion shillings
($149.09 million), as earning from Kenya surged 19 percent.
Its non-performing loans, however, jumped by over a third,
sending the ratio of bad debts to 8.9 percent from 7.3 percent a
The lender blamed three major loan accounts in the
construction and government supplies services sectors for the
jump, pledging to reverse the trend through recoveries.
"Generally, across the industry, the level of NPLs remain a
concern," KCB Chief Executive Joshua Oigara said in a statement.
KCB's shares are down 28 percent this year at 31.75
shillings, underperforming the benchmark NSE-20 share index,
which is down 13.88 percent this year.
KCB put off a rights issue planned for later this year to
raise 10 billion shillings, citing a strong projected cash flow
for the full year. It did not give a new time frame.
Daniel Kuyoh, a senior investment analyst at Alpha Africa
Asset Managers, said the level of bad debts at KCB were
generally in line with expectations, after the central bank
tightened rules around classification of bad loans for
"The central bank is very heavy on enforcing the
guidelines," Kuyoh said, adding lack of revenue growth among
some major Kenyan firms, which took out bank loans, could also
be driving bad loans.
Patrick Njoroge, the governor of the central bank, said in
April that bad debts for Kenyan banks stood at 8 percent, well
above the 5.7 percent level in April 2015.
Njoroge, who took over in June last year, has been driving
efforts to tighten bank supervision, after three medium- and
small-sized lenders collapsed in the nine months to April,
sparking concerns about the stability of the sector.
KCB said net interest income rose 16 percent to 22.53
billion shillings in the first half, while net loans and
advances went up 8 percent.
Its earnings per share rose to 6.94 shillings from 6.11
shillings. Its shares were up 1.6 percent to trade at 32.00
shillings on the Nairobi Securities Exchange at 0749 GMT, before
giving up some of the gains to trade at 31.75 shillings later.