KENYA COMMERCIAL BANK GROUP PROFITS SHOOTS UP

KENYA COMMERCIAL BANK GROUP PROFITS SHOOTS UP

By Wambui Odhiambo

Kenya Commercial Bank Group profit has shot

up in the year 2019

after Tax return up 5% to 25.2 billion Kenya

shillings.

Improved Profitability and shareholder returns

driven by loan growth,non-funded income , cost

management and NBK acquisition.

Delivered improved Profitability and higher

returns to shareholders for the full year ended

December 2019, posting a 5% jump in profit

after tax to KShs.25.2 billion.

Net earnings increased from KShs.24 billion in

2018 on the back of loan book growth, non-

funded income from the digital banking and

cost management initiatives across the

business.

Net Profit–Up 5% to KShs.25.2B from

KShs24.0B Total Operating Income- Up17%

from KShs.71.8Bto KShs.84.3B

Operating Expenses (exclprovisions)-up 10.0%

from KShs.35.0B to KShs.38.5B. Cost to Income

Ratio (excl.provisions)–45.7% Cost of

Funds-2.8% from 3.2%

Total Assets- up 25.8% from KShs.714.3B to

Kshs.898.6B Total capital to risk weighted

assets-19.0% (CBKmin14.5%)

Core capital to total risk weighted assets-

17.2% (CBKmin10.5%)

Non Funded Income 33.4% from32%Return

Equity-20.7% NPL Coverage- (IFRS)-72.1% from

68.6% Liquidity Ratio-37.1% from33.3%

KCB Group CEO and MD, Joshua Oigara said

the business remained resilient despite the

challenging economic conditions witnessed in

the various markets and the wider global

economy.

“The East African region continued to face

various down side risks that ranged from

adverse weather patterns to stress from

currency fluctuations and the pressure from oil

imports ”he said while releasing the results in

Nairobi on Thursday. “All business lines were

strong on both funded and non-funded income

as cost control, operational efficiency and

driving excellent customer experience remained

a top priority,” said Mr. Oigara.

Both the Kenya business and the international

subsidiaries delivered strong income growth.

Acquisition of National Bank of Kenya (NBK)—a

transaction that was finalised in the last quarter

of 2019—solidified the Group’s base from a

revenue and balance sheet position.

Total income increased 17% to KShs.84.3

billion while operating expenses grew much

slower by 10%, resulting in an improved cost to

income ratio of 45.7%, compared to 48.7% the

previous year.

Net interest income expanded 15% to KShs.

56.1 billion from KShs.48.8 billion primarily due

to a 17% growth in loan book, digital lending

and additional interest income from NBK.

Fees and commissions surged 39% to KShs.

19.8 billion on diversified income streams.

Enhanced investments in digital channels

pushed non funded income up 22.6% to KShs.

28.2 billion from KShs.23.0 billion in 2018.

“Our investments in diversified channels are

giving our customers a means to access

banking services conveniently, at a competitive

prices and in line with our purpose of

simplifying their world to enable their progress”

said Mr Oigara.

During the year under review, the number of

non-bank transactions increased to 97% with a

majority of them conducted via mobile devices.

Mobile loans advanced increased to KShs.212

billion from KShs.54 billion in 2018.

The cumulative disbursement via mobile over

the past five years totaled to KShs. 319 billion.

Cost Management and Efficiency

At KShs.38.5 billion, totalvpre-provision

operating expenses were relatively contained

due to cost efficiency measure, growing from

KShs.35.0B billion, largely driven by staff costs

which went up13.4% in part due to the

acquisition of NBK.

KCB maintained its lending pattern in 2019,

growing assets base despite lower asset yield,

observed in the key market—Kenya—due to

reduction of the benchmark lendingrate.

Total assets surged 26% to KShs.899 billion

from KShs.714 billion in 2018.

The key drivers for this growth were the loan

book growth of 17% to KShs

535.4 billion—reflecting the strong lending

pipeline primarily driven by retail and corporate

banking customersegment—and the customer

deposits growth of 28% to KShs.686.6 billion.

The main driver for this growth was acquisition

the National Bank of Kenya (NBK) .

The ratio of non-performing loans to total

balance loan book increased to 10.9%

(7.4%excl.NBK), well below the industry average

of 12.0%.

As a result, provisions for impairment increased

to KShs.899 billion from KShs.2.9 billion.

The key sectors driving this deterioration in

asset quality were trade, tourism and

manufacturing sectors within the corporate

banking book and on the mobile loan portfolio.

The stock of NPLs increased to KShs.63.4

billion (KShs.38.5 billion excludingNBK) up from

KShs 32.7 billion in 2018, following

consolidation with NBK.

Overall, the business continued to generate

good returns for its shareholders averaging a

return on equity of 20.7% in 2019.

Shareholders’ equity was up14.1% from

KShs113.7 billion to KShs.129.7 billion.

KCB distributed part of the Profit by way of an

interim dividend of KShs1.0 per share in the

course of 2019.

KCB Group Board has proposed a final dividend

of KShs.2.5 per share to be presented to

shareholders in the Annual General Meeting to

be held in May this year.

KCB Group maintained healthy buffers on its

capital ratios over the minimum regulatory

requirement.

All banking subsidiaries metregulatory capital

requirement with the exception of NBK which

was below total capital requirement.

This is expected to be addressed within the first

half of 2020 through various initiatives at NBK.

The Group’s core capital as a proportion of total

risk weighted assets closed the period at 17.2%

against the Central Bank of Kenya statutory

minimum of 10.5%.

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