Pages

Friday, July 31, 2015

KCB’s first half profit up 13pc on loans income

Corporate News
KCB Group chief executive Joshua Oigara during the release of the lender’s results in six months to June at the Hilton Hotel in Nairobi on July 30, 2015. PHOTO | SALATON NJAU
KCB Group chief executive Joshua Oigara during the release of the lender’s results in six months to June at the Hilton Hotel in Nairobi on July 30, 2015. PHOTO | SALATON NJAU 
By GEORGE NGIGI, gngigi@ke.nationmedia.com
In Summary
  • KCB announced a Sh9.2 billion net profit in six months to June compared to Sh8.1 billion in a similar period last year, boosted by a 31.3 per cent growth of its loan book to Sh320 billion.

Increased interest income from KCB’s loan book raised its after-tax profit for the first half of the year by 13 per cent, keeping the lender in contention to maintaining its position as one of Kenya’s most profitable lenders.
The bank announced a Sh9.2 billion net profit in six months to June compared to Sh8.1 billion in a similar period last year, boosted by a 31.3 per cent growth of its loan book to Sh320 billion.
“We have consistently focused on growing new business lines and strengthening the subsidiaries to drive the business to higher profitability and guarantee its sustainability. This is bearing fruit as seen in the increased earnings,” said chief executive Joshua Oigara when he announced the results yesterday.
Equity Bank, which is KCB’s closest challenger for the most profitable Kenyan bank position, is expected to announce its half-year results on Tuesday next week.
The contribution of its subsidiaries in Uganda, Rwanda, Tanzania, Burundi and South Sudan to the bottom line rose to 10 per cent from 7.3 per cent last year, with Tanzania and Rwanda being key drivers.
KCB said it plans to expand to four new markets in the next five years, with an eye on Ethiopia, Somalia, DRC and Mozambique.
The bank’s deposit base expanded by 26.2 per cent to Sh443 billion over the one-year period driven by increased customer numbers attributed to new business lines such as its partnership with Safaricom and Islamic finance arm, KCB Sahl.
Mr Oigara said KCB M-Pesa currently has 2.1 million users who have borrowed more than Sh2 billion in the four months the platform has been operational.
Fees and commissions were up 20.7 per cent with growth mainly driven by increased transactions on the bank’s agency, mobile and ATM fees, which now account for 69 per cent of total transactions.
Analysts noted that the bank could have posted higher profit if it were not for lower margins and higher provisions for bad loans.
“The growth in assets was impressive but when you look at earnings they were within target — profitability was affected by margins and provisions,” said Francis Mwangi, head of research at Standard Investment Bank.
Narrowing of interest margins is expected to be a challenge to the banking sector in the second half of the year as cost of funds rises while the increase in lending rates remains constrained by the Kenya Banks’ Reference Rate policy.
The bank kept a tight lid on expenses resulting in an improved cost to income ratio of 48.6 per cent from 51.2 per cent three months earlier.
The management said the lender was looking at raising long term capital through debt and equity to allow it book large infrastructural loans in the region’s nascent, capital intensive sectors such as mining, telecommunications and power generation.

“When we look forward we see capital will not be enough to grow so we are looking at early 2016 when we will need to raise equity, debt we are able to get,” said Mr Oigara.
The bank is currently above capital adequacy ratio requirements with its core capital to total risk weighted assets at 14.6 per cent against a mandatory requirement of 10.5 per cent.
Its total capital to total risk weighted assets is at 15.9 per cent against the minimum required 14.5 per cent.
KCB’s borrowed funds rose 71 per cent due to additional Sh17 billion debt from firms such as International Finance Corporation and Ghana Investment Bank.
The lender is also seeking an additional Sh15 billion from IFC and Sh10 billion from European Investment Bank to boost its tier two capital.
The bank was recently accredited an AA rating by South African, Global Credit Rating, giving investors confidence to lend to it.
Yesterday, KCB was the most actively traded counter at the Nairobi Securities Exchange moving over five million shares worth an estimated Sh256 million. The share traded at Sh50.50, a shilling lower than the previous day’s price.

No comments:

Post a Comment