KCB earnings shrink 43pc on higher loan provisioning

Customers wait to be served in the banking hall at the Kenya Commercial Bank (KCB), Kencom branch in Nairobi. [Photo, Courtesy]

KCB recorded a 43 per cent drop in net profit in the first nine months of this year, posting Sh10.9 billion after it set aside a big chunk of cash for possible defaults.

The lender, which is grappling with the effects of Covid-19, posted Sh19.2 billion in September last year. Loan loss provision during this period increased more than three times to Sh20 billion in a period that saw lenders restructure loans running into billions of shillings.

KCB Chief Executive Joshua Oigara said this had been a challenging year for business, staff, customers and the economy, a situation that has seen the lender forego some earnings.

“The pandemic has had a deep socio-economic impact and hence our decision to stand with our stakeholders,” said Mr Oigara.KCB has restructured loans worth Sh105 billion to customers distressed by Covid-19, and increased provisions due to heightened risk of default

KCB’s income from fees and commissions also underperformed, largely due to the waiver of fees on transactions done on mobile phones as well as fees on restructuring.

However, net interest income increased 24 per cent to Sh47.9 billion from Sh38.7 billion, riding on additional interest from investments in government securities and lending.

Interest on loans rose by 12 per cent to Sh45.7 billion from Sh40.5 billion in September last year, which means customers were still servicing their loans

The lender raked in Sh16.8 billion from government securities in the period under review, from Sh10.1 billion, even as customer deposits increased to Sh772.6 billion, from Sh586.7 billion.

Interest on deposits rose to Sh15.4 billion from Sh12.7 billion in the same period last year. Loans and advances declined by 15 per cent to Sh577.5 billion compared to Sh686.4 billion.