KCB assets hit Sh2 trillion, resumes dividend payout

KCB Group has joined the list of Sh2 trillion asset-rich banks and maintained its top position as the most profitable financial institution in East Africa. 

The growth in assets was on the back of stable customer deposits growth, which closed the period at Sh1.49 trillion.

The lender's financial results for the first six months of the year show its assets rose by six per cent to Sh1.98 trillion, up from Sh1.86 trillion.

Its net earnings for the first half of the year ending June rose 86 per cent to Sh29.9 billion, attributed to the Group's sustained focus on supporting customers and economic recovery efforts.

The bank posted a profit after tax of Sh16.1 billion in a similar period last year. 

KCB Group MD Paul Russo said profitability was supported by strong revenue growth across businesses on both funded and non-funded income lines.

"We delivered a commendable first half of the year, despite strong headwinds in the operating environment, especially in Kenya, thanks to the goodwill and confidence from our customers and the commitment of our staff,'' Russo told investors on Wednesday. 

“Looking ahead, we see a stronger second half, leveraging on our Transforming Today Together strategy and the expected economic turnaround in the markets we operate in."

Net loans and advances hit a trillion shilling milestone, the first in the country, standing at Sh1.03 trillion, a seven per cent jump from additional facilities to support customers in undertaking their business activities.

Revenues rose across both funded and non-funded income lines, with net interest income growing by 35 per cent supported by improved yields and increased lending to key segments.

The non-funded income grew by 21 per cent, driven by digital banking and FX trading income as well as an enhanced contribution from Trust Merchant Bank (TMB), a DRC-based subsidiary.

Provisions increased by 20per cent, impacted by non-performing loan downgrades cushioned by the impact of the appreciation of the Kenya Shilling relative to the foreign-denominated facilities.

The Group’s gross non-performing book stood at Sh212 billion, which saw the NPL ratio close the quarter at 18.5 per cent.

This was 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 per cent and an enhanced regulatory coverage ratio of 104.3 per cent,'' Russo said. 

He added that the Group has prioritised 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 a 9.6 per cent increase due to growth in business volumes, staff costs, and inflationary pressures, to close the period at Sh44.3 billion.

The cost-to-income ratio was down to 46.8 per cent from 55.3 per cent on the back of strong income growth coupled with stringent cost management initiatives.

Return on Equity improved to 25.5 per cent, up from 15.9 per cent, while shareholders’ funds grew by 14 per cent during the period to close at Sh248.2 billion up from Sh217.9 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,'' Russo said. 

The bank's core capital as a proportion of total risk-weighted assets stood at 17.8 per cent against the statutory minimum of 10.5 per cent while the total capital to risk-weighted assets ratio was at 20.3 per cent against a regulatory minimum of 14.5 per cent.

All banking subsidiaries except NBK were compliant with their respective local regulatory capital requirements.

The contribution by subsidiaries (excluding KCB Bank Kenya) continued to increase, closing the half at 37.8 per cent in pre-tax profits and 34.4 per cent in total assets. 

The performance helped the Group resume dividend payout, with the board recommending an interim dividend amounting to Sh4.8 billion, the biggest interim dividend in the lender’s history

 KCB Group chairman Joseph Kinyua said the bank demonstrated remarkable strength and adaptability amid global and local challenges, by delivering good asset growth and improved capital adequacy ratios.

“This performance has enabled the Board to recommend an interim dividend of Sh1.50 per share,” he said.

KCB Group continued to deepen its commitment to its sustainability and ESG priorities where it seeks to support 14 Sustainable Development Goals (SDGs).

On Tuesday, the Group launched its 2023 Sustainability and ESG Report where it allocated over half of its loans worth Sh675 billion to support sustainable businesses.

In March, KCB Group PLC and Access Bank PLC signed a binding offer for the proposed acquisition of 100 per cent 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.