High interest rates raise KCB’s net profit 53 per cent
Kenya Commercial Bank Group chief executive Martin Oduor-Otieno during the announcement of results for last year in Nairobi Thursday. DIANA NGILA
Kenya Commercial Bank (KCB) has posted a 53 per cent rise in net profit for the year ended December helped by high interest rates and a surge in fees and commissions.
The bank said its net profit increased from Sh7.1 billion a year earlier to Sh10.9 billion with the fourth quarter –when interest rates jumped from 18 per cent to above 25 per cent—generating 41.4 per cent of the full year earnings.
Fees and commissions grew by 84.7 per cent to Sh4.9 billion in a period when it four subsidiaries generated Sh1.1 billion or 10 per cent of the total profit from a loss of Sh1.6 billion.
“We benefitted from the high interest rates in the fourth quarter when the positive contribution from our subsidiaries was also realised,” Martin Oduor-Otieno, the chief executive of KCB’s told the Business Daily.
The bank made a net profit of Sh4.5 billion in the fourth quarter of the Sh10.9 billion buoyed by expensive credit as commercial banks reviewed their lending rates upwards from October in step with tight monetary policy.
While the bank reviewed its lending rate upward, KCB paid less on deposits compared to its peers because it stepped up the number of current accounts—which does not earn interests—further boosting its net earnings.
Its customer deposit grew 32 per cent to Sh259 billion but the cost on the customer funds increased 15 per cent to Sh3.8 billion—underlining the impact of the current accounts on KCB’s income statement.
The volatility in the currency market saw the bank income from forex trading rise to Sh3.6 billion from Sh2.7 billion a year earlier while it generated an additional Sh1.6 billion from bond trading.
KCB attributed the surge in fees and commissions to its wide presence in the region and heavy investments in ICT systems which reduced costs and boosted cross-border transactions such as money transfers.
The bank has lifted its dividend payment 48 per cent to Sh1.85 from Sh1.25 the year earlier, which is in step with the industry as banks like Barclays Bank and Housing Finance have rewarded their investors with higher payouts.
Its share at the Nairobi Securities Exchange has gained 37 per cent in the past three months to Sh20.25 a share—defying the bear run at the Nairobi bourse that has seen most stocks shed value by double digit.
The bank, which has operations in Tanzania, Rwanda, Uganda and South Sudan, said all its regional subsidiaries turned a profit and said launch a new unit in Burundi in April with a Sh1.1 billion investment.
