KCB half-year profit doubles to Sh15.3b on lower loan provision

(L-R) KCB Group CEO and MD Joshua Oigara with KCB Group Chairman, Andrew Wambari Kairu and KCB Group Chief Finance Officer, Lawrence Kimathi, during the KCB Group half-year financial results announcement. The Group announced a profit after Tax growth up 102pc to Sh.15.3 billion from Sh.7.6 billion.

KCB Bank more than doubled its net profit in the first half of the year to Sh15.3 billion, largely on account of increased loan repayments.

In the same period last year, the lender recorded a profit after tax of Sh7.6 billion at a time when banks were overwhelmed by a surge in non-performing loans. 

The 102 per cent profit growth came on the back of a reduction in impaired loans, including close to 90 per cent of the Sh105 billion that KCB restructured in line with a deal brokered by the Central Bank of Kenya. This unlocked nearly Sh4.4 billion that had been set aside as insurance against possible defaults.

Total operating income grew by 13.7 per cent to Sh51.2 billion, buoyed by increased lending activities and non-funded income.

“We saw a strong first half of the year for the business with improved economic activity,” said KCB chief executive Joshua Oigara in an investor briefing on Friday. 

He said the resilient and diversified nature of the bank’s business had helped it navigate the adverse effects of the Covid-19 pandemic.

“The business is well-positioned to catalyse the ongoing economic recovery as well as benefit from this resurgence,” Mr Oigara added.

KCB, Kenya’s largest lender, became the second company after Equity Bank to cross the Sh1 trillion mark in the value of assets, which touched Sh1.02 trillion in June from Sh953 billion last year.

Provisions for the period were down 40 per cent to Sh6.6 billion as the Covid-19 related impairments had been recognised in the 2020 full year, and the facilities restructured to cushion customers from the impact of the pandemic.

Net interest — from loans and advances — rose to Sh36.6 billion from Sh31.1 billion last year. This, the lender said, was on the back of higher interest-earning assets and effective management of cost of funding.

KCB chair Andrew Kairu said that while the pandemic was still spreading, the rollout of vaccines globally had brought hope that the crisis would soon be brought under control.

“The resilience and providence of our concerted efforts to reinforce the sustainability of our business have enabled us to support and walk with our customers, staff and other stakeholders,” he said.

Oigara disclosed that the bank would soon be adding to its stable another subsidiary in Rwanda even as it eyes the Congo market where its competitor, Equity Bank, seems to have tightened its grip.

“On Banque Populaire Du Rwanda (BPR), we will finalise that transaction shortly.

“It is a question of days from now, and our intention is to have 93 per cent shareholding,” he said, adding that they had already bagged 76 per cent.

The deal will be finalised in a matter of days, said Oigara, with another one in Tanzania expected to be finished in the fourth quarter.

KCB Group shareholders have already approved the acquisition of two banks in Rwanda and Tanzania, with the lender awaiting regulatory approvals.

The bank has proposed to acquire up to 100 per cent of the issued ordinary shares in BPR and stake in African Banking Corporation Tanzania at a total cost of Sh4.4 billion.

“These acquisitions will reinforce the group’s leadership position and give us a stronger edge to play a bigger role in driving the financial inclusion agenda in the East African region, while building a robust and financially sustainable organisation for the shareholders,” said Kairu in June.

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