KCB grew its net profit for the first half of 2022 to Sh19.6 billion on the back of increased interest income, non-funded income and a reduction in loan-loss provisions.
This is a growth of 28.4 per cent compared to the Sh15.4 billion that the listed lender recorded in the first six months of 2021.
Subsidiaries, especially the Rwandan unit, also contributed to improved earnings. Interest from customer loans grew by 3.9 per cent to Sh38.4 billion, while that from government securities jumped 3.8 per cent to Sh15.9 billion.
There was also increased earnings from digital lending and foreign exchange, helping the bank continue its post-Covid-19 growth. Growth in operating interest and expenses was offset by a significant reduction in loan provisions by 34 per cent, with the lender taking away Sh3.4 billion it had set aside as insurance against possible defaults.
Nonetheless, blighted by a jump in bad loans, the ratio of non-performing loans (NPLs) - loans not serviced for more than three months - to total loans increased to 21 per cent.
This NPL ratio is higher than the industry ratio at around 15 per cent.
KCB Group Chief Executive Officer Paul Russo, however, committed to bringing down the bad loans. “This is the highest it can be. I have worked through my projection. And I am very sure we will be within the 15 and 17 per cent range the next time we meet,” he said during the investor briefing in Nairobi yesterday.
KCB’s Chief Finance Officer Lawrence Kimathi, identified roads, manufacturing, and hospitality as some of the sectors that have contributed to the jump in NPLs. “But we are not stopping there (at 15-17 per cent),” said Kimathi, noting that they hope to scale down to single digits by end of next year.
The main culprit in the increase of NPLs was KCB Kenya, with all the other subsidiaries improving on their levels of bad loans.
The bank’s balance sheet grew by 18 per cent to Sh1.2 trillion, with much of the growth - Sh137 billion - being organic. Another growth of Sh51 billion was from the acquisition of Banque Populaire du Rwanda (BPR).
It is the first investor briefing that Russo is holding after replacing Joshua Oigara towards the end of May. KCB recently entered the Democratic Republic of Congo (DRC) becoming the second Kenyan lender after Equity to set up a base in the lucrative market.