KCB profits jump 8 per cent as NBK turnaround gains momentum

Kenya’s biggest lender KCB Group has posted an eight per cent jump in profit after tax for the first quarter ending March 31, 2020.

At the same time, its newest subsidiary National Bank of Kenya (NBK) saw its profit after tax for the quarter under review rise 134 per cent from a similar period last year, signalling the turnaround of the troubled lender is gaining momentum. 

KCB Group attributed the rise in its net profit to Sh6.3 billion from Sh5.8 billion in a similar period last year to stronger non-funded income lines and interest income boost owing to the growth of its loan book. 

Meanwhile, NBK’s growth in net profit to Sh155 million from Sh66 million in a similar period last year was attributed to a growth in the loan book and cost management initiatives. 

Announcing the results yesterday, KCB Group Chief Executive Joshua Oigara (pictured), however, said that the overall quarterly performance fell below expectations due to a tough macroeconomic environment.

“The operating landscape has further been exacerbated by Covid-19 immediately shifting our focus to supporting our customers through the crisis, pursuing business continuity and the safety and well-being of our staff and all other stakeholders,” said Mr Oigara.

“We expect performance in the next two quarters to be impacted as the crisis is affecting the ability of customers to service their loans and reducing the demand for credit. We have taken measures to conserve out capital, manage costs and keep a keen eye on liquidity,” he added.

The group’s total operating income rose 22 per cent to Sh22.95 billion in the quarter under review compared to Sh18.76 billion in a similar period last year. 

Digital banking

Non-funded income rose 31 per cent to Sh7.9 billion driven by digital banking, improved foreign exchange earnings and additional income from NBK. 

Non-branch transactions through mobile, internet and agency banking rose three per cent from 94 per cent last year’s quarter one, while branch transaction volumes decreased by eight per cent on channel migration initiatives.

The group’s balance sheet, on the other hand, grew 31 per cent from Sh725.7 billion to Sh947.1 billion, well within the range of the KShs.1 trillion target by the end of 2022.

Customer deposits rose 34 per cent to Sh740.4 billion on the back of NBK’s acquisition and onboarding of new customers.

The loan book recorded a 19 per cent growth, expanding to Sh553.9 billion from Sh464.3 billion, with the ratio of non-performing loans to total loan book rosing to 11.1 per cent due to consolidation of NBK.

NBK brought on board Sh25 billion in Non-performing Loans (NPLs), which saw the stock of NPLs increased to Sh66.2 billion, up from Sh38.8 billion in 2019, following the consolidation.

The NPL portfolio is concentrated in trade, personal and real estate segments.