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By Victor MUJIDU
KCB Group plc recorded KShs.9.8 billion in profit after tax for the first quarter of 2023, supported by increased revenues.
The Group recorded a strong balance sheet growth; with total assets hitting KShs.1.63 trillion, rising on strong customer confidence, as the focus shifted to supporting customers to navigate the hard economic environment while ring-fencing the business for prospects and growth.
Revenue increased by 26.9 percent to Sh36.9 billion mainly driven by the non-funded income from customer transactions across the Group network and the consolidation of Trust Merchant Bank (TMB); the Group’s newest subsidiary in the Democratic Republic of Congo. This demonstrated the range and diversified income streams across the Group’s businesses, adequate to cover the elevated operating and funding costs.
The contribution of Group businesses (excluding KCB Bank Kenya) to the overall profitability was up to 35 percent from 17.2 percent as investments in regional businesses continued to pay off. The contribution to total assets improved to close the period at 38.2 percent.
“Our focus was on delivering value and support to customers to help them navigate the tough economic environment while driving revenue growth for the Bank. The first quarter performance highlights the resilience of the business across the corporate and retail franchises.
The regional businesses performed well, giving credence to the regional expansion strategy,” said KCB Group CEO Paul Russo.
“During the period, we continued to embed customer obsession across the Group to position it as the key pillar through which we deliver our strategy.
We continuously pursued innovations and delivered products with leading value propositions. We are deliberate on driving stronger growth, on the back of delivering value to customers, growing the existing businesses, opening new frontiers and a tight cost management regime,” he added.
Q1 Key Performance Highlights
The NFI grew by 59.2% to KShs.14.8 billion from the service fee income stream that is anchored on enhanced digital capabilities. This has resulted in customers conducting 99% of all transactions with ease and secured digital channels.
The contribution from TMB is off to an impressive start, making it the second-largest subsidiary in the Group. TMB contributed KShs. 1.9 billion in profit before tax in the quarter and 14% of the Group’s total assets.
Costs increased by 46.1% from the consolidation of TMB and expenditure to support additional revenues generated.
Provisions rose by 99%, driven by increased credit risk and the impact of forex devaluation in Kenya, a prudent step on the backdrop of a challenging operating environment that has greatly impacted asset quality.
On asset quality, the ratio of non-performing loans (NPL) stood at 17.5%, largely driven by downgrades from the KCB Kenya business. The Group is focused on recovery efforts and proactive management of the lending portfolio management to improve asset quality.
Total assets rose 40% to KShs.1.63 trillion, making KCB the largest Bank in Eastern Africa, riding on higher loans and investment in government securities which were funded by growth in customer deposits and additional borrowings.
Customer loans were up by 32% to KShs.928.8 billion, from increased lending across the Group while customer deposits rose by 41.5% to KShs. 1.20 trillion, mainly from TMB and additional deposits from the existing businesses.
Shareholders’ funds grew by 17% to KShs.214.8 billion from the increase in accumulated profits for the year to date.
Capital buffers were well above regulatory limits, with core capital as a proportion of total risk-weighted assets standing at 13.6% against the statutory minimum of 10.5%. The total capital-to-risk-weighted assets ratio was at 17.0% against a regulatory minimum of 14.5%. All banking subsidiaries were compliant with their respective regulatory capital requirements.
“While the Group’s growth in the past has been majorly driven by Kenya, its future hinges on becoming a significant regional player. We, therefore, continued to bolster our capacity to match the meaningful role that we seek to play and become an undisputed leader in the region,” said KCB Group Chairman Andrew Kairu. “We are optimistic about improved performance in the remaining quarters of the year despite the tough environment that has impacted on customers and the economy as a whole,” he added.