Companies

KCB adopts bearish outlook as rate cap law reduces income

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KCB chief executive Joshua Oigara. photo | Salaton Njau

KCB Group #ticker:KCB, Kenya’s biggest bank by assets, has made a bearish forecast for this year in the wake of an interest rates cap law that has forced it to open a fresh round of staff retrenchment to tame costs.

The listed lender projects that its net interest margin will drop by one percentage point this year, with return on equity dipping by up to four percentage points owing to a narrowed interest rates spread.

“Return on earnings are expected to be lower by between 300-400 basis points while profitability is expected to be conservative,” KCB says in its annual report for 2017.
“Banks are also expected to be more conservative in their lending while investments in Treasury bills are expected to increase.”

KCB reported an after-tax profit of Sh19.72 billion in 2016.

The bank - present in Uganda, Rwanda Tanzania, Burundi and South Sudan – on Thursday last week invited its 7,192 workers to apply for an early retirement scheme.

“The window is now open for members of staff to send in their applications,” KCB Group CEO Joshua Oigara said in a staff memo seen by the Business Daily.

The bank has set a target to save about Sh2 billion per year from the ongoing retrenchment.

Its wage bill grew 15.7 per cent to Sh17.7 billion in 2016.

Mr Oigara is banking on technology to improve efficiency and reduce the need for human interaction - riding on automation and alternative channels such as ATMs, mobile, online and agency banking.

“The business landscape dictates that the future belongs to leveraging automation, digitisation, fintech, partnerships and collaborations to sustain growth,” said Mr Oigara in the memo.

KCB incurred Sh186 million in staff restructuring costs in the period to December 2016; with 223 employees leaving the bank in the review period.

In January the bank laid off 28 staff at the Rwandan unit.