Business

KCB Beats Equity Bank With Remarkable 69% Net Profit Jump

KCB Group has reclaimed its position as East Africa’s most profitable bank, boasting a remarkable 69% increase in net earnings for the first quarter of the year. The bank’s Q1 results, released Wednesday, reveal net profits soaring to Sh16.5 billion, up from Sh9.8 billion in the same period last year.

KCB Group Managing Director and CEO Paul Russo described the performance as historic, driven by revenue growth across the bank’s network, which pushed the balance sheet to Sh2 trillion, up from Sh1.6 trillion a year ago.

Key Financial Highlights

  • Total Revenues: Increased by 31.6% to Sh48.5 billion, driven by both funded and non-funded income streams.
  • Non-Funded Income: Constituted 36% of total revenues, bolstered by higher transaction volumes from customer confidence and the adoption of digital banking and alternative channels.
  • Customer Deposits: Rose by 25.4% to Sh1.5 trillion, with significant contributions from the Kenyan market.
  • Customer Loans: Increased by 12.2% to Sh1.13 trillion, reflecting additional lending to support business activities.

Strategic Initiatives and Operational Efficiency

Russo credited the bank’s robust performance to strategic investments in digital and payment capabilities, as well as regional expansion efforts. “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,” he noted.

The bank’s operational efficiency also saw notable improvement, with the cost-to-income ratio dropping to 43.3% from 51.2%, thanks to strong income growth and strict cost management. However, total costs rose by 11.3% to Sh21 billion due to inflationary pressures.

Loan Impairments and Asset Quality

Loan impairments surged by 53.4% due to downgraded facilities, resulting in a gross non-performing loan (NPL) book of Sh205.3 billion and an NPL ratio of 18.2%. This increase was attributed to downgrades in Kenya and the impact of foreign currency translations. The group is prioritizing efforts to improve asset quality through measures aimed at reducing NPL ratios.

Shareholder Value and Capital Strength

Shareholders’ funds grew by 11% to Sh238.6 billion, reflecting a strong return on equity, which improved from 19.7% to 28.6%. This increase highlights the value gap between the group’s book and market valuations, presenting an attractive entry point for new shareholders and growth opportunities for existing ones.

KCB Group Chairman Joseph Kinyua expressed optimism about the bank’s prospects for the remainder of the year. “We have made tangible progress to sustain superior shareholder value by delivering strong financial performance while driving our agenda to build a future-proof business,” Kinyua said.

Regulatory Compliance and Capital Ratios

KCB maintained a robust capital profile, with a core capital to risk-weighted assets ratio of 15.7%, exceeding the statutory minimum of 10.5%. The total capital to risk-weighted assets ratio stood at 17.8%, above the regulatory minimum of 14.5%. All banking subsidiaries complied with local regulatory capital requirements, except for NBK.

Conclusion

KCB Group’s strong Q1 performance underscores its resilience and strategic focus in navigating challenging economic conditions. The bank’s investments in digital transformation and regional expansion, coupled with prudent financial management, position it well for sustained growth and profitability in the future.

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