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By Victor MUJIDU
KCB Group PLC recorded a 69 per cent growth in net profit to Ksh16.5 billion in Q1 2024 from Ksh9.8 billion, regaining its position as East Africa’s most profitable bank and cementing leadership as the largest lender by assets.
The performance, a historic quarterly milestone which was boosted by revenue growth across all the Group network also saw the balance sheet close the quarter at Ksh2.0 trillion, up from Ksh1.6 trillion in a similar period last year.
Total revenues increased by 31.6 per cent to Ksh48.5 billion, driven by both funded and non-funded lines.
The non-funded income, at 36 per cent of the total revenues, was supported by increased transaction volumes from customer confidence in our brand, the adoption of digital banking, and alternative channels for making banking accessible at the convenience of our customers.
“Despite a difficult operating environment across the region, we saw a strong revenue performance in the business as we entrenched prudent credit, liquidity, cost, and overall risk management.
Consumer deposits continued to grow, a sign of confidence that our clients have in the brand. Our deliberate investments in digital and payment capabilities, as well as our regional expansion approach, continued to deliver impressive results,” said KCB Group Chief Executive Officer Paul Russo.
“We continued to leverage Group capabilities through syndication of facilities and tapping on centres of excellence to drive operational efficiency.
Under our shared services model, we prioritized automation of key processes, rollout of more products on our self-serve channels, and review of loan application processes, which continued to drive customer obsession and reduce friction. Looking ahead, we are upbeat about the prospects in all the markets we operate in.”
“Moreso, we seek to leverage the strong relationships we have built and our strong brand to drive growth in the medium term, guided by our new 2024–2026 strategy dubbed Transforming Today Together,” he added.
Financial Highlights
The Group Total Assets grew by 22.4 per cent to Ksh. 2.0 trillion, funded by an increase in customer deposits from all segments withstanding the tough operating environment.
Customer deposits increased by 25.4 per cent to Ksh1.5 trillion, largely from the Kenyan market, while customer loans rose by 12.2 per cent to Ksh1.13 trillion from additional advances to support our customers’ business activities.
The contribution by Group Businesses (excluding KCB Bank Kenya) has continued to increase, closing the quarter at 17.9 per cent in pretax profits and 13.1 per cent in total assets, signaling the benefits of diversification to other markets outside Kenya.
The cost-to Income ratio was down to 43.3 per cent from 51.2 per cent on the back of strong income growth coupled with stringent cost management.
Total costs increased 11.3 per cent from Ksh18.9 billion to Ksh21.0 billion, largely driven by inflationary pressures that have impacted the East African market and the world in general.
The loan impairment charge was up by 53.4 per cent from downgraded facilities. Overall, the Group’s gross nonperforming book stood at Ksh205.3 billion, which saw the NPL ratio close the quarter at 18.2 per cent.
This was a result of downgrades in Kenya and the impact of the translation of the foreign currency-denominated book.
The group has prioritized efforts to improve asset quality, with various measures in place to reduce the ratios both in the short and long term.
Shareholders’ funds were up 11 per cent during the period to close at Ksh238.6 billion from Ksh214.8 billion in the previous year.
This is a testament to the value gap that exists between our book and market valuations, signifying a good entry point at a discount for new shareholders looking for sustainable long-term value as well as an opportunity for existing shareholders to grow their investments. Return on equity was up from 19.7 per cent to 28.6 per cent.
In the pursuit of sustaining a strong capital profile, the group core capital as a proportion of total risk-weighted assets stood at 15.7 per cent against the statutory minimum of 10.5 per cent while the total capital to risk-weighted assets ratio was 17.8 per cent against a regulatory minimum of 14.5 per cent.
All banking subsidiaries, except NBK, were compliant with their respective local regulatory capital requirements.