KCB Group chief executive Joshua Oigara. FILE PHOTO | NMG
Kenya’s biggest bank by assets KCB Group #ticker:KCB reported a
19.6 percent jump in net profit for the nine months ended September,
buoyed by cost management and a drop in provision for bad debts.
KCB
said Wednesday that its net earnings grew to Sh18 billion from Sh15
billion a year earlier, widening its profits gap with rival Equity
Group, whose net profit rose 7.6 percent to Sh15.7 billion in the same
period.
“The improved performance was primarily driven
by robust cost management and growth in net interest income,” the
Nairobi Securities Exchange-listed firm said in a statement, adding that
the lower operating expense came from reduced spending on staff.
KCB
slashed its operating expenses by Sh2.1 billion to Sh28.6 billion even
as its provision for bad debt fell 42.6 percent to Sh1.7 billion.
The
bank said its investment in technology-based delivery channels such as
mobile and agency banking has allowed it to grow with minimal increase
in costs.
Non-branch transactions, by volume, now stand
at 87 percent of total services. “Our focus on technology-driven growth
continues to deliver both client satisfaction and efficiencies while
keeping costs under control and diversifying the income streams,” chief
executive Joshua Oigara said.
KCB’s provision for non-performing loans declined even as gross defaults remained flat at Sh34.7 billion.
Government securities
The
bank said its loan book has improved in two consecutive quarters and
its financial statements showed it has significantly benefited from
increased purchase of government securities.
KCB’s loan
book grew 3.7 percent to Sh435.2 billion while investment in government
debt rose 10.9 percent to Sh100.6 billion, raising its total interest
income 5.1 percent to Sh49.1 billion.
Customer deposits
rose 6.1 percent to Sh526.8 billion but interest expenses rose at a
faster pace of 15.9 percent to Sh12.8 billion, reflecting an expansion
of interest-bearing accounts.
Mr Oigara offered a positive guidance for the full year ending December, saying the bank is “on track to deliver on its 2018 targets.”
Mr Oigara offered a positive guidance for the full year ending December, saying the bank is “on track to deliver on its 2018 targets.”
“This fourth quarter of
the year has begun with vibrancy in most of the economies we operate in,
which will form a good bedrock to a strong 2018 close and also tee up a
good start to 2019.”
KCB and Equity’s performance
have become the clearest signals that the big banks are well positioned
to overcome the narrower lending margins that came with the capping of
lending rates since September 2016.
Losses, reduced profitability
Most
small and medium-sized banks, whose business models were built on
interest rates of 15 per cent and above, have reported a mix of losses
and reduced profitability.
Big banks, which hold most
of the industry’s deposits, are also set to benefit from the recent
removal of the minimum interest payable on interest-bearing accounts.
Such
accounts previously earned at least 70 percent of the Central Bank Rate
(CBR), placing their minimum returns at seven percent for most of the
period when the law was in force.
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