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KCB profit slows as interest rates law cuts income by Sh2 billion

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KCB Group posted a pre-tax profit of Ksh6.59 billion in the first quarter ending March 31, 2017. In the full year 2016, the Group reported Ksh3.4 billion loss on net monetary position due to the accounting for hyperinflation in South Sudan.

This entire amount was accounted for in the fourth quarter of 2016. Adjusting for the specific loss on net monetary position attributable to quarter 1 of 2016 translates to a 5% growth in pre-tax profit in Q1 2017 over same period in 2016. 

Cost management

The adverse impact of the interest capping law was cushioned by a 27% reduction in interest expense, 20% growth in non-interest income and prudent cost management that limited cost growth to below inflation. 

The Group’s non-interest income was up 20.3% from Ksh4.6 billion in the first quarter of 2016 to Ksh5.6 billion within the same period this year, underscoring the growing importance of income derived from alternative revenue channels. 

KCB Group CEO and MD Joshua Oigara said the full effect of the law capping interest rates resulted in an interest income dip of 12% during the quarter from Ksh16.0 billion in Q1 2016 to Ksh14.1 billion this year, a loss of Ksh2.1 billion.. The interest expense declined by 27% from Ksh5.2 billion to Ksh3.8 billion occasioned by reduced cost of funds.

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Further, the Group posted significant improvement in Forex income which was up 72.1%; total assets up by 8.8% and shareholder funds up 20.6%.

Key financial highlights

Net Interest Income down by 4.7% from KSh10.86B to KSh10.34B

Forex Income increase by 72.1% from KSh747M to KSh1.29B

Total Operating Income up by 2.7% from KSh15.48B to KSh15.91B

Total Assets improved by 8.8% from KSh556.8B to KSh605.8B

Net Loans and Advances up 14.3% from KSh345.9B to KSh395.5B

Customer Deposits increased 7.9% from KSh423.4B to KSh456.8B

Shareholder funds grew by 20.6% from KSh83.9B to KSh101.2B

“We have witnessed an increasingly challenging operating environment across all markets. In Kenya, the interest rate caps have made it difficult to price for risk whereas some of our subsidiaries are experiencing high inflation and shortage of foreign currency,” said Mr Oigara.

The Group has pegged its future on its Fintech strategy that rides on a digital platform to provide seamless services for its customers. “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,” said Mr Oigara.

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KCB Group continues to face challenges in South Sudan, due to the hyperinflation situation in the economy. The continued depreciation of the currency (South Sudanese Pound) has had a negative impact on our results. “The Group continues to monitor South Sudan’s overall performance and appropriate optimization measures are being executed,” said Mr. Oigara.

KCB has made significant advances in adopting technology resulting to more than 79% of the transactions performed outside the branches. Mobile banking transactions have increased by 37%, Agency banking increased by 50% and Point of Sale transactions increased by 33% in Q1 2017 compared to the same period last year. Over the same period, branch transactions have reduced by 27%.

“This year, we will make investments to increase mobile banking customers to over 15 million, grow the agency network to over 20,000, leverage on Biashara Smart for SMEs and affordable housing through home loans” Mr Oigara added.


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BT Reporterhttp://www.businesstoday.co.ke
editor [at] businesstoday.co.ke


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