NAIROBI, Kenya, Apr 30 – The Kenya Commercial Bank (KCB) Group has announced a 5 percent increase in its pre-tax profits for the first quarter of 2009, from Sh1.65 billion in same period last year to Sh1.73 billion.
KCB Group Chairman, Peter Muthoka, said on Thursday that the increase reflected the slow momentum associated with every first quarter of the year.
“The first quarter is always slow as businesses re-orientate themselves to the realities of the new economic year, yet expenses have to be incurred. We expect to witness a significant pick up in our performance in the second and third quarters as the business environment improves,” said Mr Muthoka.
KCB Group Chief Executive, Martin Oduor-Otieno, said the bank’s interest income increased by 24 percent from Sh3.3 billion in the period to March 31, 2008 to Sh.4.2 billion in the last quarter due to growth in loans and advances.
At the same time, interest expense increased by 89 percent from Sh0.4 billion in the 1st Quarter of 2008, to Sh0.7 billion in the last quarter. This increase in interest expense is attributable to higher interest rates in 2009 as well as an increase in deposits.
During the quarter, foreign exchange income went up by 37 percent to Sh646 million from Sh470 million. Fees and commissions went up by 16 percent to Sh1.35 billion, up from Sh1.16 billion.
“The increase in fees and commissions and foreign exchange earnings reflects the growth in the volumes of our business and will, together with interest income, underpin our performance for the remainder of the year,” envisaged Mr Oduor-Otieno.
Total operating expenses increased by 28 percent as a result of higher spending on ongoing business activities, a rise in staff costs, branch expansion and continued investment in Information Technology.
“We continue to invest in our business growth as well as funding network expansion to enhance our ability to provide quality service to our customers,” said Mr Oduor-Otieno.
Provisions for bad and doubtful debts in the quarter remained flat compared to the same period last year.
The bank’s assets went up by 30 percent in the last quarter compared to the same period in 2008 moving up from Sh131.6 billion to Sh171.1 billion.
Net loans and advances jumped by 47 percent from Sh67.4 billion in first Quarter of 2008 to Sh99.2 billion in the last Quarter as the bank marketed aggressively for good loans.
“Our liability strategy is to focus on optimising collection of low cost funds through our wide branch network to finance our growing loan book,” commented the Chief Executive.
Shareholders equity went up by 57 percent during the period to hit Sh22.5 billion from Sh14.4 billion the previous year, and this attributed to the retention of earnings and proceeds from the second rights issue concluded last August.
The bank remained strong on prudential ratios with core capital to total deposit liabilities improving from 10.4 percent in March 2008 to 14.2 percent in the last quarter (CBK minimum is 8 percent). Total capital to total risk weighted assets stood at 15.4 percent (CBK minimum is 12 percent) while liquidity was at 29.3 percent (CBK minimum is 20 percent).
The Chief Executive said the bank’s priority in 2009 is to consolidate the business growth especially through improved customer service, technology enhancement and staff development in order to establish a strong platform for a Pan-African expansion from 2010.
“Our target for this year in terms of channel expansion is 70 new branches and 200 new ATMs across the region so as to take our services closer to the target markets,” said Mr Oduor-Otieno.
Chairman Muthoka praised the performance saying it reflected great support from the bank’s stakeholders.
“KCB is a strong regional business. The cross listing (in Tanzania and Uganda) will boost its visibility and acceptability in the various markets where we operate,” he commented.
On regional expansion, the Bank reiterated its plans to open business in Burundi this year to conclude the regional expansion agenda.
“Our network is growing at a considerable pace with Uganda now having nine branches just over a year into operation, Tanzania, eight and Sudan, five. This year we expect to open six branches in Rwanda to stamp our footprint as a strong regional brand,” Mr Muthoka added.
KCB Sudan and KCB Tanzania are already making profits for the regional giant with KCB Uganda expected to break even in 2009.
“We are committed to achieving decent returns for our stakeholders from these investments,” said the Group Chairman.
Mr Oduor-Otieno cautioned however that the global economic downturn will no doubt affect Kenyan businesses.
“We are on course towards meeting our targets for 2009 but we must take into account the possible effects of the global financial crisis on our business,” Mr Muthoka also observed.