KCB Q1 net profit up 6pc as bad debts jump

KCB CEO Joshua Oigara during an interview with The Standard team in Nairobi on June 9th, 2015. PHOTO: WILLIS AWANDU

KCB Group has reported a 6 per cent growth in profit after tax to Sh4.6 billion for the first quarter of 2016, helped by higher interest income.

In the quarter ending March 31, the bank had a net profit of Sh4.63 billion, up from Sh4.36 billion in the same period last year.

The bank’s net loans and advances to customers rose to Sh345.94 billion, from Sh297.03 billion a year earlier. That led to a 24 per cent rise in net interest income to Sh11.45 billion.

“We are excited about the continued growth of the business across markets and we are confident that digital payments and mobile money will deliver significant growth for the Group. We see these two as key catalysts in deepening financial inclusion,” said KCB Group Chief Executive Officer Joshua Oigara (pictured).

KCB, however, states that growth was partially hampered by the high cost of funds carried over from 2015 and an increase in the provision for doubtful loans. The lender, which is East Africa’s largest commercial bank by assets, saw gross non-performing loans (NPLs) increase to Sh30.44 billion. The bank increased its provision for bad debts by 149 per cent from Sh550 million to Sh1.4 billion, pointing to a difficult operating environment.

Mr Oigara further stated that the results indicated that the bank had complied with all mandatory requirements by the CBK even as it continues to expand. “The bank continues to meet the capital regulatory ratios. The additional capital injection through tier 2 debt and the rights issue approved by shareholders last month is expected to improve the ratios considerably,” said Oigara.

Net loans and advances grew by 16 per cent driven by corporate and retail businesses coupled with increased use of KCB M-Pesa, which now has a customer base of more than 7 million users. Over Sh10 billion worth of loans have been disbursed since its inception in March last year. Total assets registered an increase of 9 per cent to Sh556.8 billion.

The lender said it planned to expand its Ethiopian operations. “We have set out to gradually grow the Ethiopia business over time, currently operating as a representative office while strengthening partnerships with different stakeholders on the ground with plans of progressing it into a fully fledged operation in the medium term,” he said.

KCB last month beat a host of several commercial investors to sign a deal allowing Chase Bank to resume operations after being under receivership for two weeks.