KCB Group profits after tax soared by 8 percent to KSh 6.3 billion from KSh5.8 billion for the first quarter of 2020 ending March attributed to strong loan books and non-funded income.
The lender’s total operating income came at KSh22.95 billion compared to KSh18.76 billion in Q1 2019.
Non-funded income grew by 31 percent to KSh7.9 billion from KSh6.1 billion, as enhanced digital banking, improved foreign exchange earnings, and additional income from the National Bank of Kenya.
The Group’s balance sheet remained strong, growing 31 percent from KSh725.7 billion to KSh947.1 billion while customer deposits increased to KSh740.4 billion after NBK acquisition and onboarding of new customers.
An additional KSh53 billion was banked as deposits for the three months from December 2019.
The loan book expanded to KSh553.9 billion, a 19 percent growth from KSh464.3 billion reported in Q1 2019.
NBK acquisition amid increased depreciation in line with IFRS 16 and annual staff salary increments effected in first quarter saw operating costs surge to KSh11.1 billion, from KSh9.1 billion.
“The NPL portfolio is concentrated in trade, personal and real estate segments. The group increased the NPL coverage to 65.3 percent from 60.8 percent in 2019,” said KCB.
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The bank bagged net interest income of KSh15 billion from government securities and lending during a period described as “below expectation” by KCB Group CEO and MD Joshua Oigara on account of a tough business environment.
“The operating landscape has further been exacerbated by Covid- 19 immediately shifting our focus to supporting our customers through the crisis,” said Oigara.
“Performance in the next 2 quarters will be impacted as the COVID-19 crisis is affecting the ability of customers to service their loans and reducing the demand for credit. We have taken measures to conserve our capital, manage costs, and keep a keen eye on liquidity.”
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“The key growth driver for the bank will be its ability to leverage effectively on its digital platforms to drive both efficiency levels (CTI at 48.5% from 51.5% in 1Q19) and Non-Interest Revenue.
The operating environment has deteriorated substantially due to the unravelling pandemic with the bank increasing loan provisions substantially by 90.6% under the forward-looking provisioning of IFRS-9 standards.
We maintain our long-term BUY recommendation on KCB with a fair value estimate of Ksh 62.25,” Genghis Capital, KCB Group Plc (NSE: KCB) 1Q20 Earnings Note.
