A KCB banking hall. The bank made Sh19.6 billion in net profit in 2015, coming top among commercial lenders. PHOTO | FILE
What you need to know:
Kenya’s largest bank, made the single largest portion of its net profit from treasury operations comprising fund management business from high net-worth individuals and companies.
Data from its annual report shows that the treasury operations last year resulted in an after-tax profit of Sh7.68 billion, even though this was less than the net profit of Sh10.6 billion realised the previous year.
In total, the bank made Sh19.6 billion in net profit in 2015, coming top among commercial banks. This was a growth of 16.5 per cent from the previous year, which enabled the institution’s return on equity (ROE) to hit 25.0 per cent.
KCB Group, Kenya’s largest bank, made the single largest portion of its net profit from treasury operations comprising fund management business from high net-worth individuals and companies.
Data from its annual report shows that the treasury operations last year resulted in an after-tax profit of Sh7.68 billion, even though this was less than the net profit of Sh10.6 billion realised the previous year.
The treasury return was followed by that of retail banking with a profit of Sh7.06 billion, having grown by 29.7 per cent from the previous year. Corporate banking, though traditionally a big part of its business, came third with Sh6.28 billion.
KCB made a Sh6.4 billion loss from own investment activity due to interest rate volatility.
The bank aggressively embarked on building on new business channels. In its analysis Cytonn Investments noted KCB used mobile banking to disburse Sh9.1 billion in loans, underlining the importance of the new business channel in deepening the retail segment.
“KCB Group launched KCB M-Pesa, a partnership with Safaricom as an alternative distribution channel enabling the bank to disburse loans of Sh9.1 billion through the mobile platform. (The channel) is expected to be a key growth driver for the bank in terms of deposits and loans,” said Cytonn.
The immediate takeoff in the mobile banking business underlined that the year had been a smooth one for the lending segment of the bank.
Standard Investment Bank (SIB) said that for 2015, amongst tier-1 banks, KCB’s earnings per share (EPS) outperformed analysts’ estimates mostly owing to better-than-expected loan loss recoveries.
In total, the bank made Sh19.6 billion in net profit in 2015, coming top among commercial banks. This was a growth of 16.5 per cent from the previous year, which enabled the institution’s return on equity (ROE) to hit 25.0 per cent.
Cytonn noted its high upside on intrinsic value (real worth based on fundamentals such as ROE) ranking among the listed banks, adding that its current price is too low for it.
“KCB Group was a clear leader in intrinsic value ranking; KCB Group is undervalued with an upside of 34.6 per cent,” it said in the latest analysis of the sector.
SIB said that in the current uncertain banking environment – where three commercial banks collapsed in nine months – KCB would gain from flight to safety.
Gain
“At 1.56 (times) P/B (price to book), the bank is trading at 1.1 per cent discount to the sector — in the current banking environment where large banks are perceived to be less risky, KCB is likely to gain from ‘flight to quality,” said SIB.
Cytonn analysts also said beyond the high return on equity and undervaluation, the institution had the highest corporate governance score among the banks listed on the Nairobi Securities Exchange (NSE).
“KCB Group rose to the top position … based on its robust franchise value on the back of high return on average equity of 25.0 per cent, in addition to obtaining the highest corporate governance score of among listed banks,” said Cytonn.
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Note: The results are not exact but very close to the actual.
