CORONAVIRUS PANDEMIC EAT KCB HALF YEAR NET PROFIT

CORONAVIRUS PANDEMIC EAT KCB HALF YEAR NET PROFIT

By Judith Sidi Adhiambo

KCB Group Plc posted KShs.7.6 billion in after-

tax profits for the first six months of 2020,

marking a 40% decline from the previous year.

This was largely caused by increased

provisions in the wake of higher credit risk due

to the COVID-19 pandemic.

“The second quarter was the toughest in our

recent history as the pandemic hurt economic

activity across markets. Most of the key

sectors were nearly shut down and our

customers continue to face unprecedented

challenges,” said KCB Group CEO and MD

Joshua Oigara.

“When the virus hit home in March, we made a

commitment to look after our customers, staff

and other stakeholders while pursuing business

continuity. We intend to keep on this promise

even under the current worsening operating

environment,” said Mr Oigara.

In response to the pandemic, KCB Group has

instituted a raft of interventions to cushion and

support key stakeholders such as customers

and employees. For the period under review, the

Bank restructured facilities worth KShs. 101

billion to cushion customers against the effects

of the crisis.

The debt-relief measures have seen customers

apply for their loans to be restructured, credit

lines expanded and loan tenures extended to

keep them financially afloat. KCB has also

waived fees associated with loan restructuring

and those for mobile transactions below a

thousand shillings.

According to the financials , total operating

income surged 17% to KShs. 45.0 billion in the

period compared to KShs. 38.6 billion in June

2019. Net interest income was up 22% to KShs.

31.1 billion from KShs.25.4 billion, riding on

additional investments in Government

securities and lending.

Non funded income was up 6% to KShs. 14.0

billion from KShs.13.2 billion, driven largely by

revenues from the digital proposition, growth in

the forex income and additional income from

National Bank of Kenya, the newest subsidiary

of KCB Group.

The continued focus on driving digital

transactions saw the proportion of non-branch

transactions rise to 98% up from 95% in Q2

2019 mainly driven by mobile, internet and

agency banking.

Total operating expenses were up 20% on the

back of the NBK acquisition. The synergies

from the acquisition and the Group-wide cost

management drive are expected to improve this

position in the second half of the year.

The Group set aside Kshs. 11 billion as

provision expense for potential loan losses that

could crystalize as a result of the coronavirus

pandemic, compared to KShs. 3 billion

provision during a similar period last year.

Total Assets grew by 28% to KShs. 953.1 billion,

funded by customer deposits and existing

business growth. Net loans and advances grew

17% to close the period at KShs. 559.9 billion.

On the funding side, customer deposits were up

35% to KShs. 758.2 billion.

For the six months, the ratio of non-performing

loans (NPLs) to total loan book increased to

13.7% from 7.8% in 2019, mainly due to

consolidation of NBK and heightened defaults

associated with the pandemic. The stock of

NPLs increased to KShs.83.9 billion up from

KShs 39.1 billion in 2019.

Shareholders’ equity grew 12% from KShs.

117.5 billion to KShs. 132.1 billion. This was

driven by the growth in retained earnings over

the 12-month period to June 2020.

The Group maintained healthy buffers on its

capital ratios over the minimum regulatory

requirement. The Group’s core capital as a

proportion of total risk weighted assets closed

the period at 17.9% against the Central Bank of

Kenya statutory minimum of 10.5%. Total

capital to risk-weighted assets stood at 19.5%

against a regulatory minimum of 14.5%. All

banking subsidiaries met regulatory capital

requirement with the exception of NBK which

was below total capital requirement. The Group

plans to inject additional capital before the end

of this year to ensure compliance and support

the turnaround strategies expected to drive

performance.

“We project a continued strain on the business

and economy in the remaining part of the year

as the COVID-19 pandemic evolves. We will

accelerate our support to customers, roll out

cost management initiatives and seek avenues

to boost efficiency though digitization to

cushion the business from emerging

pressures,” said Mr Oigara.