KCB Group delivered a strong financial performance last year, recording KShs.19.7 billion in after-tax profit for the period ended December 31, 2017.
The profit after tax performance was flat against 2016 and is attributable to a robust loan book growth that offset the impact of lower interest rates following the introduction of the law capping interest rates, a significant growth in fees and commissions resulting from increased usage of our digital channels.
Group CEO and MD Joshua Oigara said on Thursday that the lender grew market share while at the same time recorded gains from cost-reduction programmes and improved operational efficiency.
“The business maintained a strong capital position enabling continued focus on our core lending segments in Retail and Corporate banking, deliberate investments in key strategic themes that are focused on delivering top-notch customer service and leveraging on digital channels for delivery of financial solutions resulting in the sustained growth in shareholder value,” Mr Oigara told an investor briefing in Nairobi.
Top Strategic Initiatives.
- Successful digital transformation exercise with over 13 million mobile customers, disbursement of over KShs 30 billion in mobile loans. Over 87% of transactions handled outside branch network.
- Staff rationalization programme to enhance the business model for efficient sustainable growth.
- Integration of 8 Sustainable Development Goals (SDGs) into KCB Group strategy as part of the sustainability agenda.
Key Performance Highlights.
- Total Assets: Up 9% from KShs. 595.2bn to KShs 646.7bn
- Net Loans and Advances: Up 10% from KShs 386bn to KShs. 423bn
- Customer deposits: Up 11% from KShs. 448.2bn to KShs.499.5bn
- Shareholder Funds: Up 10% from KShs 97bn to KShs. 106bn
- Profit After Tax: KShs 19.7bn – flat to 2016
- Net Interest Income: Up 3% from KShs. 47.0bn to KShs. 48.4bn
- Provisions for bad debts: up 55% from KShs. 3.8bn to KShs. 5.9bn.
The Group CEO and MD said 2017 presented one of the most challenging years in the recent past as the macroeconomic environment deteriorated across East Africa, weighing down the financial sector.
This negatively affected the performance of KCB’s subsidiaries outside Kenya, reducing their contribution to the Group’s bottom-line.
“We shrugged off quite a testing business environment across markets. The full effect of the law capping interest rate in Kenya marked by a slow business environment on account of the general election negatively hit businesses and the economy at large,” said KCB Group Chairman Ngeny Biwott.
“In South Sudan, hyper-inflation impacted on business but we remain optimistic that the political situation will take a turn for the better. Rwanda elections passed uneventfully, which was a positive indicator for business and investment in the region,” he added.
The Group’s total non-Interest income was up 2% to KShs. 23 billion as a result of growth in fees and commissions which grew by 16 percent to KShs.14.7 billion. Net interest income improved 3% from KShs. 47 billion to KShs. 48.4 billion. This helped push up the Group’s total operating income to KShs.71.4 billion, from KShs. 69.5 billion.
The continued growth of the non-interest income to KCB’s bottom-line, Mr. Oigara said, has resulted from a continued investment in new technology-based financial solutions focused on enhancing the customer journey by providing convenient access to a host of products and services.
By December 2017, KCB had over 13 million mobile customers and had disbursed over KShs. 30billion in loans through the platform. At least 57% of transactions are on mobile, 15% were handled through the Bank’s agents, 10% via the wide ATM network, 5% on various point of sale terminals while the balance was at the branch network.
A continued focus on cost-reduction programmes helped the Group slow down the yearly growth in operational expenses while improving on efficiency. Total expenses edged up 5% which was well below the inflation rate, to close at KShs.42.3 billion, from KShs.40.4 billion the previous year.
“In light of industry and market conditions, we are alive to the fact that we must run our business more efficiently and reduce costs to meet our long-term financial targets. That was one of our focus areas in 2017 as part of our transformation journey,” said Mr. Oigara.
“We are positioned for further growth across our business portfolio through leveraging automation, partnerships, digitization to sustain growth with the aim of delivery of enhanced value to our shareholders and customers,” he added.
According to the financials, KCB balance sheet continued on an upward trajectory, expanding by 9% from KShs. 595.2 billion to KShs 646.7 billion.
The Group’s liquidity position stood at 29% during the period under review and was 900 basis points above the CBK’s statutory minimum requirement.
The Group’s core capital as a proportion of its total risk-weighted assets was 490 basis points above the Central Bank of Kenya statutory minimum of 10.5% a further indicator that Group was on a firm capital footing. Overall the Group’s total capital as a proportion of its risk-weighted assets stood at 16.6% against a regulatory target of 14.5%.
KCB said the Group’s future outlook remains positive based on strong capitalization and expectations of an economic rebound this year in its key markets.
“We are looking forward to a robust 2018, our strategies and customer-centric product and services will form a firm foundation for generating greater shareholder value,” said Mr. Oigara.