KCB nine months pre-tax profit up 10%, bank opens representative office in Ethiopia

Nairobi, Kenya: KCB group has received approvals to enter Ethiopia as it seeks new markets to boost business growth, the lender said while announcing its profit before tax that climbed 10% to Sh19.4 billion in the nine months ending September 2015.

The impressive earnings were buoyed by a substantial growth in net-interest income, fees and commissions and cost management initiatives.

The bank said on Thursday that authorities in Addis Ababa had granted it clearance to run a Representative Office in the country, deepening the bank's regional expansion to enable it grow and sustain its regional business and open up trade with neighbouring countries.

KCB’s international business—Uganda, Rwanda, Tanzania, Burundi and South Sudan— had an impressive nine months performance, growing by 74% year on year to contribute 12% of the Group’s profit, compared to 7% in the same period last year.

“The new strategy adopted for the international business is gaining momentum and underpins our regional expansion model. The September 2015 numbers are an indication of a robust business model that we have continually adopted through initiatives that support customer-centricity to deliver affordability, efficiency and convenience in deepening financial inclusion across the East African region and beyond,” said KCB group CEO Joshua Oigara adding the performance in the subsidiaries affirms the bank’s growing role as a regional lender and a sustainable business.

“Across the six markets we operate in, while we experienced a relatively challenging economic environment on the overall, we have seen the business show great resilience arising from our deliberate focus on prudent cost-management and efficiency in operations, a trajectory we expect to continue in the remaining part of 2015,” said Mr Oigara

Mr Oigara said net interest income increased by 10% due to growth in the bank’s asset book partially impacted by the high cost of funds especially during the last quarter of September 2015, while gross fees and commissions grew by 14%, attributable to new products and alternative channels tailored to meet customer needs and increased transactions volumes.

Total assets grew by 34% in what saw the Bank’s balance sheet clock Sh607.3 billion up from Sh451.6 billion recorded in September last year giving KCB the financial muscle it requires as it morphs itself into a stronger player in the wider East African market. The increase on the balance sheet is attributed to a 32% growth in loans and advances which constitute the highest proportion of the assets at 57%.

As a reflection of the Bank’s growing physical expansion and a wider product and service offering, customer deposits were up 35% due to customer number growth and deposits. KCB continued to deepen its investments on new business lines like KCB Mpesa, KCB Insurance Agency, KCB Capital and KCB Sahl Banking, the Islamic finance arm while new propositions like KCB Mpesa—a partnership product with Safaricom—continue to put up a strong show.

KCB-Mpesa continues to have a good story. As at September 2015, the total number of loans disbursed stood at Sh4.3 Billion with 1.9 million loans approved since March 2015. Mr Oigara said the Bank is on track to register more than 5 million new customers by the end of the year.   

KCB hopes to ride on its strong balance sheet, diversified products and expansive regional and national footprint to deepen its financial inclusion agenda in the existing and into four new markets by 2020.

KCB received the license to open a representative office in Ethiopia on October 14, 2015, opening up the bank to opportunities in Africa’s second largest market by population. The Bank hopes to use its presence in Ethiopia to facilitate trade between Ethiopia and other East African countries while playing part in driving economic expansion in the country. 

In 2013, Kenya signed a special status agreement (SSA) with Ethiopia, giving Kenyan companies the highest possible access to the country and focusing on areas of trade, investment, infrastructure and food security.

For the period ending September 2015, the Bank maintained a strong show on all prudential ratios with core capital to total risk weighted assets at 13.9% (CBK minimum-10.5%), total capital to total risk weighted assets at 15.6% (CBK minimum-14.5%) and core capital to total deposits at 16.7% (CBK minimum-8%).

The financials show that total expenses were up by 9% while the Cost to Income Ratio stood at 49.1% —remained relatively low and below the industry average demonstrating that the bank is managing its efficiencies prudently.