KCB Group’s profits drop by 20% in the first half of 2023

KCB Group has reported a 20 percent net profit drop in the six months ended June, weighed down by staff restructuring costs and a near tripling of provisioning for loan defaults.

Net profit retreated to Sh15.5 billion from Sh19.5 billion posted in the preceding similar period as the ramp-up in provisions overshadowed earnings from the mainstay business, where revenue grew by 22.2 percent to Sh73.1 billion.

KCB’s operating expenses increased by 60 percent to Sh50.61 billion in the period provisioning for non-performing loans (NPLs) jumped 2.4 times to Sh10.2 billion from Sh4.32 billion.

The rise in NPLs provisions, added to a 24 percent rise in staff costs to Sh17.5 billion and a 79.8 percent jump in other operating expenses to Sh17.1 billion added to the spike in the operating costs.

KCB Group chief executive Paul Russo said net profit was impacted by the aggressive provisioning of loans in KCB Kenya and inherited legal claims in National Bank of Kenya (NBK) as well as staff restructuring costs incurred in the two units to right-size the group.

“Profitability was under pressure in the first half from increased funding costs on higher market deposit rates, prudent provisioning on legacy credit facilities, and provisions for legacy legal claims at NBK,” said Mr Russo.

“Looking ahead, noting the actions we have taken and with significantly improved liquidity, business focus is on accelerated performance in the second half of the year while supporting the distressed customers.”

KCB’s net interest income grew 12.1 percent to Sh45.5 billion as the loan book expanded by 32.3 percent to Sh964 billion.

Non-interest income was up 30.3 percent to Sh27.56 billion, adding to the growth in the total revenue.

KCB group managed to improve its NPL ratio to 17.4 percent compared with 21.5 percent it had in the half year ended June last year, pointing to the gains of a special committee that Mr Russo picked to address loan defaults.

Business outside Kenya —Tanzania, South Sudan, Rwanda, Uganda, Burundi and DRC Congo— delivered Sh8.5 billion pre-tax profit during the review period, being an equivalent of 37.8 percent of the group’s Sh22.46 billion gross earnings.

KCB’s total assets rose 54 percent to Sh1.84 trillion, driven by consolidation of Trust Merchant Bank (TMB) acquired last December, placing it ahead of Equity Group, which closed June with assets of Sh1.64 trillion.

Equity, which grew half-year net profit by 7.2 percent to Sh25.4 billion, remained ahead of KCB on profitability.

KCB customer deposits rose 62 percent to Sh1.47 trillion on the TMB acquisition, placing it ahead of Equity, which closed the review period with Sh1.17 trillion deposits.

“The Group is well positioned for future growth, riding on its solid governance structures and digital capabilities, strong regional presence and committed staff to support customers and other stakeholders,” said Joseph Kinyua, KCB Group chairman.

Source; https://www.businessdailyafrica.com/bd/corporate/companies/kcb-profit-falls-to-sh15bn-on-higher-costs–4344756

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