KCB Group has posted a pre-tax profit of Ksh 22.4 billion in the third quarter ending September 30th, 2017 a growth of 3.1% against the same period last year when it registered a pre-tax profit of Ksh 21.7 billion.
Total interest income was down 3.6% to Ksh 46.8 billion as the effect of interest rate cap and an economic slowdown in the political season set in. This was partially offset by a reduction in interest expense by 10.9% bringing net interest income to KSh 35.7 billion, a decline of 1% against third quarter in 2016.
Total operating income grew by 4.6% on the back of non-interest income to close the quarter at Ksh 53.2 billion cushioning the Group’s earnings in a challenging economic environment. Total assets improved by 14.5% from Ksh562.3 billion to Ksh643.8 billion.
KCB Group CEO and MD, Mr. Joshua Oigara, said the full effect of the law capping interest rate in a quarter marked by a slow business environment on account of the general election in Kenya – the Group’s largest market – was mitigated by growth in the loan book, prudent management of cost of funds and focus on non-branch channels.
“Our business fundamentals remain strong. We remain optimistic and true to our strategy, even in the face of challenges. As the business environment evolves, it is important for the Group to expand its revenue streams to remain competitive. This aggressive focus on non-branch channels leveraged on our Fintech strategy is paying off,” said Mr Oigara.
KCB Group’s non-interest income currently accounts for 32.9% of the total operating income, underscoring the growing importance of income derived from non-branch revenue channels. The Group expects alternative revenue channels to be the growth driver in the next few years. KCB has pegged its future on its Fintech strategy that rides on a digital platform to provide seamless services for its
“The banking sector continues to undergo numerous challenges and as a Group, our continuous innovation and customer centric orientation ensures that we remain focused on acting as an enabler for progress to our customers,” said Mr Oigara.
KCB’s adoption of new technologies is bearing fruit having acquired over 10 million customers on its mobile platform either directly or through partnerships over the past five years. Currently, non-branch channel systems—Mbenki, KCB M-PESA, Mobi and payments— account for 85% of total transactions.
Since inception of the flagship KCB M-Pesa platform in March 2015, the Bank has disbursed over Ksh
20.3 billion in loans to over eight million customers on their mobile phones.
“By 2020, it is our expectation that through our Fintech the contribution of non-interest income will grow towards 40% of the Group’s operating income. As the business environment evolves, it is important for the Group to expand its revenue streams to remain competitive. We shall continue to concentrate on growing non-interest revenue contribution by driving forex and trade revenues, in addition to optimising our agency card and mobile banking services,” said Mr Oigara.
KCB Group’s liquidity position stood at 37.7% in the third quarter of 2017 and was 17.7% above the CBK’s statutory minimum requirement. The Group’s capital strength remains robust with a total capital of Ksh 101.9 billion in the third quarter of 2017 up from Ksh 86.2 billion in 2016.
The Group’s core capital as proportion of its total risk weighted assets was 6.9% above the Central Bank of Kenya statutory minimum of 10.5% a further indicator that Group was on a firm capital footing.
Overall, the bank’s total capital as a proportion of its risk weighted assets stood at 18.7% this year compared to 17.9% in the same period in 2016.
Mr Oigara said: “We need to continually manage our capital and risks to keep the business growing while delivering on our targets. The future lies in leveraging technology to drive efficiencies in our operations in order to serve our customers better with relevant products that meet their expectations. I am glad that KCB is among the pioneers in this emergent space. Our focus will be on generating higher
growth, and over the next three years, we will be seeing a bigger and more efficient bank.”