Subsidiaries, cheap deposits lift KCB profit 15.4 per cent

KCB Group posted a 15.4 per cent per cent rise in net profit for the period to September helped by cheap deposits and improved earnings from its foreign subsidiaries.

Net profit rose to Sh10.8 billion for the nine months to September compared to Sh9.4 billion a year earlier in a period that saw its income from lending to homes and companies drop Sh1.1 billion to Sh23.8 billion.

The bank benefited from a cut in lending rates by the central bank, which sent lending rates down to a low of 14 per cent during the period, from 25 per cent a year ago as deposit rates dropped by more than half.

KCB’s deposit costs dropped to Sh5.8 billion from Sh8.7 billion, translating into savings of Sh2.9 billion that is higher than the additional profits of Sh1.5 billion.

This was backed the near doubling of profits of its foreign subsidiaries in Tanzania, Rwanda, Uganda, South Sudan and Burundi whose profit stood at Sh1.33 billion from last year’s Sh680 million.

“We are satisfied with the ongoing growth momentum of the business and are confident we shall achieve our target for the year,” Chief Executive Joshua Oigara (above) said in a statement, without elaborating.

“This performance is in line with our expectations from subsidiary business and growth opportunities in cross border trade in the region.” The bank has previously stated that a reduction of the cost to income ratio and an increase in profit from the foreign units were key to its growth strategies.

Housing Finance posted a 70 per cent increase in net profit to Sh676 million for the nine months to September compared to Sh396 million a year earlier.

KCB becomes the second listed bank to report quarter three numbers after Housing Finance. Its profit growth was slightly above the industry average growth of 14.4 per cent as captured by Central Bank.

Cheap deposits also helped Housing Finance post a 70 per cent increase in net profit to Sh676 million for the nine months to September.

KCB Group’s loan book grew by Sh14 billion Sh225.6 billion in the first nine months while deposits grew by Sh13 billion in the period to Sh301 billion, cementing its position as Kenya’s largest bank by assets size.

KCB’s non-performing loan book grew to Sh8.8 billion from Sh6.07 billion, which analysts attributed to the high interest rate regime that prevailed for most of last year.
Its shares Thursday remained unchanged at Sh48.5 having gained 65 per cent over the past year.