KCB Group PLC recorded a 54% growth in total assets to KShs.1.86 trillion in the first half of the year ending June 30, 2023, as net profit closed at KShs.16.1 billion.

The balance sheet growth was driven by the consolidation of Trust Merchant Bank (TMB) acquired in December 2022, and an increase in customer deposits to KShs.1.47 trillion, underpinning the customer confidence in our brand.

Consequently, the loan book increased by 32% to KShs.964.8 billion from KShs.730.3 billion in the half year 2022 as we continue to support our customers to grow their businesses.

Revenue grew by 22.2% to KShs. 73.1 billion, driven by consolidation and growth of TMB, increase in customer loans, and non-funded income (NFI). The NFI stream was propelled by fees and commissions and sustained growth of digital channel transactions and volumes.

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Profit after tax was significantly impacted by aggressive provisioning on facilities in KCB Kenya, inherited legal claims in National Bank of Kenya (NBK) and staff restructuring costs incurred in KCBK and NBK being an investment to right-size the organizations.

The Group also prudently raised its loan loss provisions on foreign currency-denominated credit facilities on account of a challenging operating environment,

Commentary: Group CEO Paul Russo

“Despite a challenging economic environment across our operating markets, the business remained resilient delivering a strong balance sheet and increased contribution from regional businesses. 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 KCB Group CEO Paul Russo.

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“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” he added. Performance Highlights

• Performance of regional businesses- Contribution from companies outside Kenya increased by 166% to 38.1% of the Group business with profit before tax at KShs.8.5 billion.
• On the revenues front, funded income increased by 12.1% to KShs. 45.5 billion on loans and Government securities growth to offset the change in interest expense from the increased cost of funding. Non-funded income increased by 43.4% to KShs.27.6 billion.
• Operating costs rose 48% to KShs.40.4 billion mainly contributed by legacy legal claims, staff restructuring expenses and TMB consolidation.
• Customer deposits increased by 61.9% from TMB consolidation and organic growth.
• There was a corresponding growth in Customer Loans to KShs.964.8 billion, a 32% jump in loan disbursements to our customers across all the markets.
• On asset quality, the NPL ratio eased to close the period at 17.4%, an improvement of 410bps from the previous year. The Group is committed to improving asset quality.
• Shareholders’ funds increased by 20% to KShs.218 billion from the increase in profits for the period.
• KCB Group maintained healthy Capital ratios, complying with regulatory limits. Core capital as a proportion of total risk-weighted assets stands at 15% against the statutory minimum of 10.5%. The total capital to risk-weighted assets ratio was at 18.4% against a regulatory minimum of 14.5%. All banking subsidiaries operating outside Kenya were compliant with their respective regulatory capital requirements.

Latest Corporate Developments

• In Early August, KCB Bank Kenya and the Swedish International Development Cooperation Agency (SIDA) rolled out a KShs. 1 Billion guarantee scheme will go towards de-risking SMEs in their efforts to access credit and support their growth ambitions. The 7-year guarantee facility will enable the bank to strengthen its commitment to financing Small and Medium-Sized Enterprises (SMEs) that continue to experience challenges, especially with access to affordable credit.
• In June, KCB Group signed an Africa-wide deal to facilitate settlements of cross-border transactions on the continent. The agreement with the Pan-African Payment and Settlement System (PAPSS) makes KCB the first Bank in East Africa to onboard the financial market infrastructure that provides a secure and efficient channel for processing cross-border payments. The platform is expected to guarantee transaction speed, affordability, and reliability, effectively boosting intra-African trade and prices.
• KCB has deepened its play in the payments space, leveraging digital capabilities with a partnership between the Bank, VISA and Thales to roll out a new service that allows customers to make in-store payments through the KCB App by tapping their Near-field communication (NFC) enabled smartphones at any contactless-enabled payment terminal.
• The Group continued to enhance its customer value propositions. In June, KCB and NBK signed an agreement with Britam General Insurance to distribute affordable health insurance products targeted at Small and Medium Enterprises (SMEs) nationwide. In the deal, KCB Bancassurance Intermediary Limited and NBK Bancassurance Intermediary Limited will jointly distribute the newly launched KCB Simba Health and Uzima Tele Insurance Plans.