KCB Group recorded a 43 percent drop in net profit during the nine months period ended September 30 owing to the Covid-19 pandemic that hurt banking transactions and fuelled a significant jump in bad loans and loan loss provisions.
The lender, which has operations in Kenya, Uganda, Tanzania, Rwanda, Burundi and South Sudan, recorded a net profit of Ksh10.89 billion ($108.9 million) compared to Ksh19.16 billion ($191.6 million) in the same period last year.
The performance was largely impacted by increased provision on loans and advances in the wake of increased risk of credit default in an economy battered by the Covid-19 containment measures, including night curfews and a ban on social gatherings.
“This has been a challenging period for the business, staff, our customers and the economy. Our focus has been on keeping our staff and customers safe while at the same time giving business support to the communities we operate in as well as our customers. The pandemic has had a deep socio-economic impact and hence our decision to stand with our stakeholders,” said Joshua Oigara, the group’s Chief Executive, in a statement Wednesday.
The lender more than tripled its loan loss provisions to Ksh20 billion ($200 million) from a low of Ksh5.84 billion ($58.4 million) in the same period last year, to cushion against the Non-performing loans (NPLs).
Non-performing loans more than doubled to Ksh97 billion ($970 million) from Ksh42.6 billion ($426 million) mainly due to Covid-19 related risks and consolidation of National Bank of Kenya (NBK).
Its ratio of NPLs to total loan book increased to 15.2 percent from 8.3 percent in the same period last year.
According to the lender’s unaudited financial statements, total income grew 16 percent to Ksh69.1 billion ($691 million) from Ksh59.7 billion ($597 million) while net loans and advances grew 19 percent to Ksh577.5 billion ($5.77 billion).
Net interest income increased 24 percent to Ksh47.9 billion ($479 million) from Ksh38.7 billion ($387 million), riding on increased investment in government securities.
Interest on loans and advances increased 13 percent to Ksh45.75 billion ($457.5 million) from Ksh40.5 billion ($405 million) while interest earned from investment in government securities increased 65 percent to Ksh16.84 billion ($168.4 million) from Ksh10.16 billion ($101.6 million)
Non-funded income remained relatively flat at Ksh21 billion ($210 million) largely affected by the reduction in loan disbursements to mobile customers, with fees and commissions remaining under pressure due to reduced banking transactions.
Fees and commissions grew marginally by one percent to Ksh14.3 billion ($143 million) from Ksh14.1 billion ($141 million), with forex income declining six percent to Ksh3.3 billion ($33 million) from Ksh3.5 billion ($35 million) due to volatility of key currencies with prolonged lockdowns and stagnating trade.
“While the pandemic is far from over and likely to continue into the next year, further straining the business and economy, we are projecting some recovery as the East African region finds some stability in living with the effects of the virus,” Mr Oigara said.
“We will continue to support our customers through the crisis and enhance initiatives geared towards ring-fencing the business. Our approach is conserving cash and managing cost.”
During the six months period to June 30 this year, KCB Group succumbed to a 40 percent drop in net earnings over increased provisioning to deal with bad loans linked to the Covid-19 Pandemic.
The bank recorded a net profit of Ksh7.57 billion ($75.7 million) compared to Ksh12.72 billion ($127.2 million) in the same period last year. This was after setting aside Ksh11 billion ($110 million) in provision for potential loan losses that could crystalize as a result of the coronavirus pandemic, compared to Ksh3 billion ($30 million) during the same period last year.