Prudent loan recovery efforts boost KCB profit

By Morris Aron

Kenya Commercial Bank, the country’s largest bank by assets, has announced a five per cent increase in its pretax profits for the financial year ended December 31, last year.

KCB, which is in the process of raising Sh15 billion long term capital in debt and equity from the capital markets for expansion plans across the region, grew its profits to Sh6.3 billion last year, compared to Sh6 billion the previous period.

He said the long-term funding plans had been approved by the bank’s board, subject to regulatory and shareholder approval, and the aim was to raise the money this year.

KCB Group Chief Executive, Martin Oduor-Otieno, says the bank had grown because of increased income from interest, and cautious loan recovery initiatives. [PHOTO: MOSES OMUSULA /STANDARD]

The bank attributed the growth to an increase in net interest income, which went up 23 per cent to Sh11.8 billion, and prudent loan recovery initiatives, which saw KCB reduce its provision for bad debts by 57 per cent to Sh1.6 billion last year, compared to Sh3.7 billion in 2008.

‘‘Despite a challenging year, our loan recovery efforts and a growth in interest income has seen as through,’’ said Martin Oduor-Otieno, KCB chief executive.

KCB, however, took a hit from increase in expenses as a result of a branch expansion network and investment in technology that it undertook in the last two years.

The bank’s total operating expenses went up by 30 per cent last year to stand at Sh15.9 billion compared to Sh12.2 billion in 2008.

The bank opened 14 new branches bringing to 203 to total number of branches across the East African region and South Sudan.

Staff costs

KCB staff costs, which contributed to its expenses, stood at just over Sh7 billion last year, compared to Sh5.9 billion the previous year.

However, this is expected to reduce with at least 1,000 employees set to be retrenched in the next two months, as the bank adopts cost-cutting opportunities.

The bank’s wage bill increased from Sh3.8 billion in 2005 to Sh5.9 billion in 2008, making it the second largest payroll after Barclays Bank, that stood at Sh7.1 billion in 2008.

Despite challenges KCB managed to grow its loan book by advancing a total of Sh163 billion in 2009 compared to Sh127 billion in 2008, a 29 per cent increase.

Customer deposits grew from Sh94 billion the previous year to Sh120 billion 28 per cent increase.

‘‘You can see that as other banks went easy on lending we continued to advance loans to deserving customers,’’ said Oduor-Otieno.

Total assets grew by 2 per cent to Sh195 billion from Sh191 billion the previous year. The company declared dividends of Sh1 per share, same as last year.