Mixed bag for lenders as KCB, IM half-year earnings drop

KCB Group Chief Executive Paul Russo during the release of first quarter 2023 financial results. [File, Standard]

Local lenders continue to register mixed results in their half-year performance amid a tough operating environment. 

KCB Group's half-year earnings to June 2023 fell 18.27 per cent to Sh16 billion, attributed to higher operating costs, which increased from a year earlier.

This came as I&M Bank said its earnings declined marginally by two per cent to Sh7 billion on the back of higher loan loss provisions.

Rival tier-one lender Standard Chartered Kenya (StanChart), however, posted a 27.7 per cent jump in after-tax profit for the six months of this year to Sh6.9 billion, the lender said.

KCB said operating costs rose by nearly half to Sh40.4 billion, offsetting a 22.2 per cent growth in interest and non-interest income to Sh73.1billion.

Group Chief Executive Paul Russo said the net earnings were hugely impacted by aggressive provisioning on facilities in KCB Kenya, inherited legal claims in the National Bank of Kenya (NBK) and staff restructuring costs incurred in the two subsidiaries.

Six banks struggle to achieve profitability

Mr Russo has been cleaning up the lender’s books since he took over the lender’s rein slightly over one year ago.

He said KCB loan loss provisions on foreign currency-denominated credit facilities jumped due to a challenging operating environment.

“Despite a challenging economic environment across our operating markets, the business remained resilient, delivering a strong balance sheet and increased contribution from regional businesses,” said Mr Russo.

“Profitability was under pressure in the first half from increased funding costs on higher market deposit rates, prudent provisioning on legacy credit facilities, and provisions for legacy legal claims at NBK.”

Ruso replaced veteran banker Joshua Oigara last year in May.

Mr Oigara, who is now chief executive at Stanbic Bank, a unit of South Africa's Standard Bank, was KCB CEO since 2013.

Mr Russo had also served as group head of human resources at KCB before being appointed to run NBK in 2019 after it was acquired by KCB.

In previous roles, Russo served as receiver manager for Chase Bank of Kenya, after it collapsed and before it was taken over by SBM Bank of Mauritius. He also previously worked for Barclays and PwC in HR management.

KCB Group's total assets grew by more than half to Sh1.86 trillion in the first half of the year, driven by the consolidation of the Democratic Republic of Congo-based Trust Merchant Bank (TMB), which the Kenyan lender bought last December.

This has seen its customer deposits jump to Sh1.47 trillion.

Equity Group earlier posted an eight per cent jump in net profit to Sh26.3 billion in the first half of this year on increased lending and strong performance of non-funded income.

Co-operative Bank of Kenya (Co-op Bank), on the other hand, posted a 5.22 per cent jump in net earnings to Sh12.1 billion for the first six months of the year.