Tag: KCB Bank news

KCB Group Plc Profit after Tax rises 86% to Ksh29.9B, Resumes Dividend Payout

Posted on by Kibaki Muthamia

KCB Group PLC profit after tax for the first half of the year ending June rose 86% to KShs.29.9 billion, as the Group sustained a focus on supporting customers and economic recovery efforts.

This was a growth from KShs.16.1 billion reported in a similar period last year, depicting a resilient performance that saw the balance sheet expand by 6% to KShs1.98 trillion, up from KShs.1.86 trillion. As a result, KCB remained the most profitable financial institution in East Africa and the largest by asset size.

Strong revenue growth across the Group businesses supported profitability on both funded and non-funded income lines.

The contribution by subsidiaries (excluding KCB Bank Kenya) has continued to increase, closing the half at 37.8% in pretax profits and 34.4% in total assets, signalling diversification benefits to other markets outside Kenya.

The performance has helped the Group resume dividend payout, with the Board recommending an interim dividend amounting to KShs.4.8 Billion, the biggest interim dividend in the lender’s history.

Financial Highlights

  • The Group Total Assets grew by 6% to 1.98 trillion from KShs1.86 trillion, on the back of stable customer deposits growth which closed the period at KShs.1.49 trillion.
  • Net Loans & Advances stood at 1.03 trillion, a 7% jump from additional facilities to support our customers undertake their business activities.
  • Revenues rose across both funded and non-funded income lines. Net Interest income grew by 35% supported by improved yields and increased lending to key segments. The non-funded income grew by 21%, driven by digital banking and FX trading income as well as enhanced contribution from Trust Merchant Bank (TMB), our DRC-based subsidiary.
  • Provisions increased by 20%, impacted by non-performing loan downgrades cushioned by the impact of the appreciation of the Kenya Shilling relative to the foreign denominated facilities.
  • Overall, the Group’s gross non-performing book stood at KShs.212 billion, which saw the NPL ratio close the quarter at 18.5%. This was as a result of downgrades in Kenya and the impact of translation of the foreign currency denominated book. To mitigate the effect of increased NPLs, provisions increased by 20% and an enhanced regulatory coverage ratio of 104.3%. The Group has prioritized efforts to improve asset quality with various measures in place to reduce the NPL ratio both in the short and long-term.
  • Costs were contained at 9.6% increase due to growth in business volumes, staff costs and inflationary pressures, to close the period at KShs.44.3 billion. Cost to Income ratio was down to 46.8% from 55.3% on the back of strong income growth coupled with stringent cost management initiatives.
  • Return on Equity improved to 25.5%, up from 15.9%, while Shareholders’ funds grew by 14% during the period to close at KShs.248.2 billion up from KShs.217.9 billion. This signals a 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.
  • The Group sustained strong capital cushions, with Group core capital as a proportion of total risk-weighted assets stood at 17.8% against the statutory minimum of 10.5% while the Total capital to risk-weighted assets ratio was at 20.3% against a regulatory minimum of 14.5%. All banking subsidiaries except NBK were compliant with their respective local regulatory capital requirements.

Latest Corporate Developments

KCB Group continued to deepen its commitment to its Sustainability and ESG priorities where we seek to support 14 Sustainable Development Goals anchored on corporate social investments and driving sustainable business practices.

On Tuesday, the Group launched its 2023 Sustainability and ESG Report that details the progress made and targets ahead.

The Group is committed to remaining a leading green financier and positioning ‘2jiajiri’, our social impact platform.

In March, KCB Group PLC and Access Bank PLC signed a binding offer for the proposed acquisition 100% of the issued and outstanding share capital of National Bank of Kenya Limited (NBK) by the latter.

The successful completion of the transaction is subject to conditions that are customary for transactions of this nature including receipt of all regulatory approvals. KCB acquired 100% of NBK in 2019.

KCB continued to top in global, regional and local accolades, cementing its market leadership position. KCB was recently listed among Kenya’s top 3 most valuable brands by Brand Finance, a UK based consultancy in its Global 500 ranking.

The Bank has also received several top awards for its role in East Africa’s economic transformation journey.

Some of the awards include Best in Customer Excellence (runners up Tier 1) and Best Banking Group Kenya- Finance Derivatives Awards.

The Bank has also received accolades for its women in banking proposition dubbed ‘FLME’.

KCB Group CEO, Paul Russo was last month named African Business Leader of the Year Award 2024 by the African Leadership Magazine, in recognition of his transformative influence on East Africa’s financial services sector where KCB has emerged as an enabler of economic progress in the region.

Co-op Bank leads Bid to Stabilize Small Businesses against Loan Defaults

Posted on by Kibaki Muthamia

There is a timely effort by banks to cushion small businesses and stave off mass loan defaults. This comes after a three-pronged hit from the weakening shilling, dollar dearth and rising interest rates.

Convergence of these headwinds has ripped up the playbook of most lenders as they move to stave off a resurgence in non-performing loans in an economy where businesses and individuals have also been hit with new taxes.

Banks are fretting that the progress, which had been achieved in offering accommodation to business customers following the Covid-19 pandemic disruptions may go under the drain in the emergence of new and unforeseen challenges in the operating environment.

They are now reaching out to small and medium-sized enterprises (SMEs) with support packages including extending repayment periods and connecting some with affordable suppliers of imported goods.

Lenders say they are emboldened by the statistics that showed that of the 6,572 MSME loans valued at Sh122.5 billion that were restructured last year, over 90 per cent were being serviced.

“With elevated repayment in terms of ticket sizes of repayment, that is actually an extra burden on the customer. But with an elongated period in terms of loan tenors, that supports customers,” says the Kenya Bankers Association.

The consistent slump of the Kenya shilling against world majors, which has shed over 19 per cent of its value against the dollar since January, has for instance thrown into disarray many small businesses dependent on imports.

Electricity and fuel prices have also been rising, partly on the State’s stance to cut subsidies and increase taxes, catching many businesses on the wrong foot.

The weakening of the shilling and rising energy prices have coincided with a rise in the cost of credit, piling significant pressure on the margins and cash flows of small businesses.

The introduction of new taxes on both individuals and businesses has played a double-edged sword role, increasing operating costs while also weakening the purchasing power of consumers.

Bankers say these shocks have been especially damaging because they were mostly unexpected and have all converged at nearly the same time.

Lenders are worried that most borrowers if left on their own, will struggle and default in servicing their loans, heightening the spike in bad debts across the banking system.

Their interventions have come to the aid of many small businesses such as car dealers, clothing and footwear shops and manufacturers who source inputs abroad and have had to adjust their budgets upwards or cut the size of imports, even as access to dollars remains scarce.

“We are supporting MSMEs on cash flow-based restructures, by matching their loan repayments with their current business income, free of restructuring fees, on a case-by-case basis,” says Mr Gideon Muriuki, managing director at Co-operative Bank of Kenya.

Central Bank of Kenya (CBK) data already indicates a steady rise in loan defaults. Gross non-performing loans—the amount of loans on which interest and principal have not been paid for at least three months— hit Sh586.2 billion in July, a Sh10.1 billion jump from the previous month.

Lenders had endured a rise in defaults for five consecutive months to May when the figure peaked at Sh592.6 billion before cooling to Sh576.1 in June.

At Sh586.2 billion, borrowers defaulted on 14.7 per cent of the Sh3.975 trillion that banks had issued as loans by the end of July. Lenders have reacted by increasing the provisioning for loan defaults.

The Head of Legal Services at Kenya Mortgage Refinance Company Elisha Nyikuli, the Director, Corporate & Institutional Banking at Co-op Bank Jackie Waithaka & the CEO National Co-operative Housing Union Mary Mathenge at a recent stakeholder’s meeting.

 

Banks’ weighted average interest rates have been rising over time to hit 13.5 per cent in July— the highest since March 2018 when the figure was at 13.49 per cent. This has been in line with the rising Central Bank rate.

Lenders, armed with the lessons learnt from managing COVID-19 shocks, reckon that working with customers early enough is likely to forestall a deterioration in the business performance of small firms.

Co-op Bank has been facilitating face-to-face meetings between Kenyan businesses and their sourcing suppliers abroad, for more structured negotiations.

Such engagements in countries such as Malaysia and Vietnam have helped SMEs improve the way they handle the sourcing of imports.

The tours, complemented with free expert financial literacy and coaching webinars have helped address issues such as cash flow and financial management, tax and online marketing.

“We regard today’s SMEs as the multinational corporations of tomorrow, and, therefore, commit significant resources and in addition partner with institutions that have domain expertise in enterprise development such as International Finance Corporation to support their growth,” says Mr Muriuki.

Lenders have also ramped up non-financial services activities that largely entail the hosting of customer engagement forums where expert-guided discussions are held to prepare SMEs for coping with emerging needs.

I&M Bank says it has enhanced support to small businesses in the form of unsecured business loans, local purchase order financing, invoice discounting and stock financing while also standing ready for restructures for firms that run into servicing problems.

“We now proactively engage one-on-one with such customers who are facing challenges to ensure they are running a sustainable business,” says Shameer Patel, head of retail banking at the I&M.

Banks are also increasing their focus on State-backed credit guarantee schemes to offer working capital loans at concessional rates.

KCB Bank Kenya and the Swedish International Development Cooperation Agency in August rolled out a Sh1 billion guarantee scheme for de-risking SMEs in their efforts to access credit

“The seven-year guarantee facility will enable the bank to strengthen its commitment to financing SMEs which continue to experience challenges, especially with access to affordable credit,” said KCB.

Source: Business Daily