NAIROBI, Kenya, May 20 – KCB Group reported Sh6.3 billion in profit after tax in the first quarter of 2020 ending March. This was an 8 percent jump from the Sh5.8 billion posted a similar period last year, driven by stronger non-funded income lines and interest income boost due to loan book growth.
KCB Group CEO and MD Joshua Oigara said the overall quarterly performance was however below expectations because of a tougher macroeconomic operating environment.
According to the financials released on Wednesday, total operating income rose 22 percent to Sh22.95 billion in the period compared to Sh18.76 billion in Q1 2019.
Net interest income was up 18 percent to Sh15 billion from additional investments in Government securities and lending. Non funded income surged 31 percent to Sh7.9 billion from Sh6.1 billion, driven by digital banking, improved foreign exchange earnings and additional income from National Bank of Kenya, the newest subsidiary of KCB Group.
The continued focus on driving digital transactions saw non branch transactions rise 97 percent up from 94 percent in Q1 2019 mainly driven by mobile, internet and agency banking. Non-Branch volumes increased by 31 percent (Sh445 billion compared to Sh340 billion) while branch decreased by 8 percent on channel migration initiatives.
On the cost side, operating expenses increased 22 percent to Sh11.1 billion, from Sh9.1 billon on the back of NBK acquisition, increased depreciation in line with IFRS 16 and annual staff salary increments effected in Q1.
The Group posted a higher provision expense—from last year’s Sh1.2 billion to Sh2.9 billion—to cover for downgraded facilities, with an expected growth in defaults across key sectors of the economy attributable to the pandemic that has shaken the country’s, regional and global economy
The Group’s balance sheet remained strong, growing 31 percent from Sh725.7 billion to Sh947.1 billion, well within range of the Sh1 trillion target by the end of 2022. Customer deposits rose 34 percent to Sh740.4 billion on the back of NBK acquisition and onboarding of new customers.
Customers put in an additional Sh53 billion into the Bank as deposits for the 3 months from December 2019. The loan book expanded to Sh553.9 billion, a 19 percent growth from Sh464.3 billion reported in Q1 2019. Asset Quality During the period, the ratio of non-performing loans to total loan book increased to 11.1 percent, mainly due to consolidation of NBK.
The stock of NPLs increased to Sh66.2 billion up from Sh38.8 billion in 2019, following consolidation with NBK which brought on board Sh25 billion in NPLs. The NPL portfolio is concentrated in trade, personal and real estate segments.
The Group increased the NPL coverage to 65.3 percent from 60.8 percent in 2019 Shareholder Returns.
Despite the challenging environment, the business continued to generate good returns for its shareholders. Shareholders’ funds closed the period at Sh135.6 billion from Sh119.5 billion in 2019, a 13 percemt improvement.