Agency revises KCB outlook from negative to stable

Kenya Commercial Bank CEO Joshua Oigara. (Photo: Wilberforce Okwiri/Standard) 

Kenya Commercial Bank (KCB) will maintain a stable financial performance in future despite the cap in cost of lending, global rating agency Standard & Poor’s (S&P) has said.

In its latest assessment of region’s largest lender by asset base, the agency revised the lender’s rating from negative to stable based on among other factors strong capital buffers and well-structured deposit-based funding model.

“We think that the group’s access to low-cost deposits, competitive margins, and well established corporate lending franchise will support its earning generation over the next 12 to 18 months,” said S&P. S&P added that the rating was also due to KCB’s solid profitability metrics, strong domestic retail and corporate franchise and high level of liquid assets.

“KCB is funded by short-term customer deposits and enjoys a sizeable portfolio of liquid assets,” said the agency

However, the American-based agency said it expects the lender to record increased credit losses and squeezed margins due to the operationalisation of the law to cap cost of credit at four per cent above Central Bank rate.

The bank’s CEO Joshua Oigara said the bank will continue to ride on increased strategic investments in digital solutions and customer-centred propositions to grow its business. “The rating confirms KCB fundamentals remain strong and we are going all out to solidify this position,” commented Oigara on the revised outlook of ‘B+/B’.

S&P further said it expects KCB to be better placed in benefiting from stronger operating environment and that its business model will support asset quality and capitalisation. The Nairobi Securities Exchange-listed lender posted a net profit of Sh10.5 billion in the first half of the year, being a growth of 14 per cent compared to a similar half in 2015.

Oigara also put on hold the plan to raise money through rights issue, telling investors that the bank expects strong cash flow in current financial year.

It was the only lender among top 10 profitable banks to lower its loan loss provision even as non-performing loans increased, signalling better expectations of future loan recovery.