KCB profit falls to $107m on higher costs
Thursday August 24 2023
KCB Group CEO Paul Russo during the bank's 2022 full-year financial results investor briefing on March 16, 2023. PHOTO | DENNIS ONSONGO | NMG
KCB Group has reported a 20 percent net profit drop in the six months ended June, weighed down by staff restructuring costs and a near tripling of provisioning for loan defaults.
Net profit retreated to Ksh15.5 billion ($107 million) from Ksh19.5 billion ($134.7 million) posted in the preceding similar period as the ramp-up in provisions overshadowed earnings from the mainstay business, where revenue grew by 22.2 percent to Ksh73.1 billion ($504.8 million).
KCB’s operating expenses increased by 60 percent to Ksh50.61 billion ($350 million) in the period provisioning for non-performing loans (NPLs) jumped 2.4 times to Ksh10.2 billion ($70.4 million) from Ksh4.32 billion ($29.8 million).
The rise in NPLs provisions, added to a 24 percent rise in staff costs to Ksh17.5 billion ($120.9 million) and a 79.8 percent jump in other operating expenses to Ksh17.1 billion ($118.1 million) added to the spike in the operating costs.
Read: KCB, Equity raise loan reserves
“Profitability was under pressure in the first half from increased funding costs on higher market deposit rates, prudent provisioning on legacy credit facilities, and provisions for legacy legal claims at NBK,” said KCB Group CEO Paul Russo.
“Looking ahead, noting the actions we have taken and with significantly improved liquidity, business focus is on accelerated performance in the second half of the year while supporting the distressed customers.”
KCB’s net interest income grew 12.1 percent to Ksh45.5 billion ($314.2 million) as the loan book expanded by 32.3 percent to Ksh964 billion ($6.7 billion).
Non-interest income was up 30.3 percent to Ksh27.56 billion ($190.3 million), adding to the growth in the total revenue.
KCB group managed to improve its NPL ratio to 17.4 percent compared with 21.5 percent it had in the half year ended June last year, pointing to the gains of a special committee that Mr Russo picked to address loan defaults.
Business outside Kenya —Tanzania, South Sudan, Rwanda, Uganda, Burundi and DRC Congo— delivered Ksh8.5 billion ($58.7 million) pre-tax profit during the review period, being an equivalent of 37.8 percent of the group’s Ksh22.46 billion ($155.1 million) gross earnings.
Read: KCB’s Congo subsidiary shines in tough first quarter
KCB's total assets rose 54 percent to Ksh1.84 trillion ($12.7 billion), driven by consolidation of Trust Merchant Bank (TMB) acquired last December, placing it ahead of Equity Group, which closed June with assets of Ksh1.64 trillion ($11.3 billion).
Equity, which grew half-year net profit by 7.2 percent to Ksh25.4 billion ($175.4 million), remained ahead of KCB on profitability.
KCB customer deposits rose 62 percent to Ksh1.47 trillion ($10.2 billion) on the TMB acquisition, placing it ahead of Equity, which closed the review period with Ksh1.17 trillion ($8.1 billion) deposits.
“The Group is well positioned for future growth, riding on its solid governance structures and digital capabilities, strong regional presence and committed staff to support customers and other stakeholders,” said Joseph Kinyua, KCB Group chairman.