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The Nairobian

KCB profit jumps to Sh25 billion as Unga Group issues profit warning

Money & Careers

By Fredrick Obura | Mar 12, 2020

***KCB Group CEO Joshua Oigara (Photo: File)***

Kenya Commercial Bank Group has recorded a 5 per cent jump in after tax profit for the year ended 2019.

Thursday the bank said its after-tax profit for 2019 jumped to Sh25.2 billion from Sh23.9 billion in 2018. The performance is linked to strong income growth in the Kenyan business and international subsidiaries.

Net interest income expanded 15 per cent to Sh56.1 billion from Sh48.8 billion due to a 17 per cent growth in loan book, digital lending and additional interest income from NBK.

Earnings per share at the group, which also operates in neighbouring Uganda, Tanzania, Rwanda, Burundi, and South Sudan, increased to 8.11 shillings during the period, from 7.83 shillings a year earlier.

Total dividend per share was Sh3.50, unchanged from the previous year, KCB said.

Meanwhile the National Bank on Thursday said it has cut its non performing loan book by 20 per cent during the 2019 financial year ending December, signaling strong recovery for the business following its acquisition by KCB Group Plc in September.

The bank however recorded Sh337 million loss in 2019 compared to a profit of Sh 156 million previous year.

According to financials released on Thursday, the stock of non-performing loans (NPL) stood at Sh25 billion, down from Sh31 billion in 2018, as a result of an aggressive recovery strategy during the period.

The gains were however diluted by higher provisions for loan loss, at Sh1.9 billion, compared to Sh185 million the previous year, effectively hurting the bottom-line. Consequently, the Bank posted a loss after tax of Sh302 million for the period.

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“We spent the last quarter of the last financial year, following the acquisition, building a firm foundation for the bank’s recovery and takeoff. We have also been on an aggressive loan recovery drive. We are optimistic of a better year ahead,” said NBK Managing Director Paul Russo while releasing the results.

The Bank’s total operating income for the year grew by 5 per cent to Sh8.4 billion, driven by increased interest income from loans and advances and higher in non-interest income from innovations, launch of new products and strategic partnerships.

Cost management strategies delivered a 3 per cent drop in total operating expenses (excluding loan provisions) from Sh7.3 billion to Sh7.1 billion.

From a balance sheet perspective, assets stood at Sh111.9 billion. Customer deposits stood at KES 86 billion, while net loans and advances, on the other hand, reduced marginally by four per cent over the same period as a result of reduced loan book and increased provisioning.

Following the acquisition, KCB Group injected Sh5 billion in fresh capital, which has significantly improved NBK’s capital buffers and enhanced capacity to underwrite new loans and mobilize more deposits.

“This has further boosted our optimism about the future of the Bank. We see a brighter outlook going forward with a strong growth pipeline across business segments,” said Mr Russo, who is also the Group International Business Director at KCB Group Plc.

The Bank’s liquidity position improved to 46.1 per cent, compared to 43.1 per cent the previous year.

In other financila reporting news, the Unga Group has issued a profit warning expecting its profit to decline by 25 per cent compared to 2018

“The decline in profitability is attributable to reduced volumes in the animal nutrition segment and increased cost of maize and wheat grains, attributable to unfavourable local weather conditions and rallying world wheat prices,” said W Jumba Company Secretary.

“In addition to low consumer demand, local farmers faced increased competition from imports of farm produce from the region, specifically in the poultry and dairy sectors.”

Unga also noted that continued low consumer demand coupled with excess production capacity, aggressive finished product pricing across the industry and restricted maize grain supply will remain a challenge.