KCB eyes international debt market as group posts Sh11.7 bn profit

Joshua Oigara, KCB Group CEO [PHOTO: FILE]

Kenya Commercial Bank (KCB) Group is set to tap into the international debt market to shore up its reserves.

The move comes as the lender posted a 16 per cent growth in pre-tax profit for the six months period ended June 30 helped by increased transaction-based income, increased lending volumes, sustained growth in the utilisation of alternative channels and strategic partnerships.

The bank's profit before tax for the six months to June 30 grew to Sh11.67 billion from Sh10.09 billion recorded in a similar period last year.

This was a billion better than Equity Bank's first-half of 2014 pretax profit, which announced a 21 per cent to Sh10.8 billion.

"This is an impressive result for us and a good reflection of the strategic initiatives the bank has been undertaking. We are confident that we are implementing the right strategies to ensure continued growth," said Oigara.

Chief Executive Joshua Oigara said the bank was on course to issuing a corporate bond in the international market to finance its mortgage business.

Oigara said plans to grow the bank's mortgage division are informed by the Government's efforts of rolling out one million mortgages in the country.

This comes barely two months after the Government successfully raised $2 billion through a sovereign bond to bolster the country's forex reserves, fund infrastructure projects and pay up a $600 million syndicated loan.

"We are looking at financing ourselves through long-term debt instruments to fund our mortgage business," Oigara told an investor briefing in Nairobi yesterday.

Oigara declined to disclose more details about the planned bond issue but pointed out that plans are underway to give KCB, the country's largest bank by branch network, an international credit rating that is critical for potential foreign investors willing to buy the bond.

"We will do our own international credit rating this year. That is the first step and then the other processes will follow. I think it is an exciting story for us," he said.

Lack of adequate long-term funds in the banking industry has been partly blamed for the low uptake of mortgages in the country, currently estimated at 19,879 accounts, according to the latest data from Central Bank.

It is argued that apart from the high interest rates borrowers are subjected t and limited access to long-term funds has made commercial banks even more reluctant to commit huge portions of their short-term deposits on long-term mortgage loans.

"Most of the funding that banks access is short term. The maturity profile of ordinary customer deposits is up to one year. When most of your deposit base is short-term, then you will not be quite comfortable financing long-term projects," said Habil Olaka, KBA Chief Executive, the industry's umbrella body.

According to KCB's unaudited financial statements, total operating income increased 13 per cent to Sh26.43 billion from Sh23.34 billion, while operating expenses grew 16 per cent to Sh13.64 billion, up from Sh11.69 billion registered in a similar period last year.

Customer deposits went up 22 per cent to Sh351.6 billion, from Sh287.72 billion, while net loans and advances surged 14 per cent to Sh244.01 billion from Sh214.08 billion.

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