Companies

KCB grows fastest among top banks

kcb-boss

KCB chief executive officer Joshua Oigara during the bank’s half-year results briefing on August 29, 2013. SALATON NJAU

Kenya Commercial Bank (KCB) on Thursday cemented its position as Kenya’s most profitable bank with fastest half-year growth as local lenders continued to dominate over foreign multinationals.

KCB said net profit grew 18 per cent to Sh7.1 billion helped by cheap deposits and increased earnings from its subsidiaries that include Tanzania, Rwanda, Uganda, South Sudan and Burundi.

This has seen KCB remain Kenya’s most profitable lender among the top-tier banks, ahead of rivals Equity (Sh6.3 billion) and Co-operative (Sh4.7 billion).

Multinationals Standard Chartered Bank and Barclays Bank continued to drop in the profit ladder after they were overtaken by Cooperative Bank to seat in positions four and five respectively.

Analysts reckon that local banks have benefited from agency banking, lower unit costs and reduced risk appetite to upend the foreign owned banks.

“Their performance (locally owned banks) is driven by cost-cutting measures through adoption of IT platforms such as mobile and Internet banking and rolling out agency banking,” said Francis Mwangi, an analyst at Standard Investment Bank.

“Agency banking has helped them generate more commissions, gain new customers and collect cheap deposits at a time when the industry loan book was flat.” Central bank data indicates that the country had 18,082 active agents in March who made more than 48.4 million transactions worth Sh250.1 billion since its introduction in March.

StanChart and Barclays are yet embrace agency banking.

At 18 per cent, KCB recorded the fastest growth among the top five banks with Co-op and Equity posting a growths of 17 per cent and 16.7 per cent respectively. StanChart and Barclays saw their profits drop by 0.5 per cent and 13 per cent in that order.

In the first six months, KCB’s interest income rose 12 per cent to Sh16.05 billion helped by lower deposit savings of Sh1.8 billion—which was more than the additional profit of Sh1.1 billion.

Its net loans and advances rose to Sh214.09 billion in June from Sh211 in December and it kept its deposits at Sh287 billion.

KCB chief executive Joshua Oigara said the foreign subsidiaries helped lift profits, adding that the bank will focus on increasing the contribution of exiting subsidiaries this year to reach 15 per cent of pre-tax profits before it expands into other countries.

KCB’s network of regional branches contributed 11 per cent of before profit in the first six months of 2013, up from 7.4 per cent in the first half of 2012.

“In the short term, which is this year, what we are going to do is to make sure that they contribute a bigger share of profits,” said Mr Oigara.

Rival lenders such as Equity, Co-op, NIC Bank and Diamond Trust Bank have expanded aggressively into the region in the past decade.

On Thursday, KCB share dropped to Sh42.75 compared to Wednesday’s close of Sh43, but the stock is up 67 per cent over the past year.

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