KCB first quarter profit drops 3pc to Sh9.5bn on DRC unit costs


KCB chief executive Paul Russo. FILE PHOTO | NMG

KCB Group net profit for the first three months of the year has dropped by 2.9 percent to Sh9.5 billion on increased costs, including that of consolidating the unit it acquired in the Democratic Republic of Congo (DRC) last December.

The retreat in net earnings from Sh9.79 billion posted in the first quarter of 2022 was despite the growth in both interest and transactions income during the review period.

Net interest income rose 11.8 percent to Sh22.06 billion as the loan book hit Sh928.8 billion in March from Sh863.3 billion in December.

Non-interest income grew by 59.2 percent to Sh14.79 billion, with the lender attributing this to increased service fee earnings tied to increased digital transactions.

KCB, however, saw a 53.4 percent rise in operating expenses to Sh22.99 billion from Sh14.99 billion in the preceding similar quarter, mainly on increased provisioning for non-performing loans and higher staff costs due to the acquisition of Trust Merchant Bank (TMB)—the DRC unit.

While TMB delivered a pretax profit of Sh1.9 billion, its consolidation into KCB books partly drove up staff costs by 39 percent from Sh6.72 billion to Sh9.36 billion.

“The first quarter performance highlights the resilience of the business across the corporate and retail franchises. The regional businesses performed well, giving credence to the regional expansion strategy,” said Paul Russo, chief executive at KCB Group.

KCB also saw its loan loss provisioning nearly double from Sh2.08 billion to Sh4.12 billion, driven by increased credit risk and the impact of foreign exchange devaluation in Kenya.

The lender said the ratio of non-performing loans stood at 17.5 percent, driven mainly by downgrades from the KCB Kenya business.

The bank said it is focused on recovery efforts and proactive management of the lending portfolio management to improve the asset quality going forward.

KCB total assets rose 40 percent to Sh1.63 trillion, placing it ahead of Equity Group, which closed the quarter with assets of Sh1.53 trillion.

Equity, which grew the first quarter profit by 6.6 percent to Sh12.3 billion, is, however, ahead of KCB on profitability.

KCB customer deposits rose 41.5 percent to Sh1.2 trillion on the TMB acquisition, placing it ahead of Equity, which closed the quarter with Sh1.11 trillion deposits.

KCB says while Kenya has majorly driven the growth in the past, its future hinges on becoming a significant regional player, especially with the DRC unit quickly becoming the second most profitable subsidiary.

“We are optimistic about improved performance in the remaining quarters of the year despite the tough environment that has impacted customers and the economy as a whole,” said Andrew Kairu, Chairman at KCB Group.

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