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Rate cap law eats into KCB's full year earnings

Guests follow proceedings during the release of KCB Group 2017 full year financial results at Radisson Blu Hotel in Nairobi on March 8, 2018. PHOTO | SALATON NJAU | NMG
Guests follow proceedings during the release of KCB Group 2017 full year financial results at Radisson Blu Hotel in Nairobi on March 8, 2018. PHOTO | SALATON NJAU | NMG 

KCB Group #ticker:KCB has announced Sh19.7 billion in net profit for 2017, a flat year-on-year performance which the lender attributed to effects of the interest rate capping law and restructuring costs.

The tier one lender’s interest income from loans and advances dipped by Sh39 million despite its loan book growing 10 per cent growth to close the year at Sh422.7 billion.

Flight to safety

KCB recorded an 11.5 per cent growth in customer deposits to Sh449.6 million, with the lender attributing this to the continuing “flight to safety” phenomenon following the collapse of some banks.

The regional lender, the second bank to release its full-year financials after Barclays #ticker:BBK, however kept its interest on deposits cost in check, dropping by six per cent to close the year at Sh13.6 billion.

“We shrugged off quite a testing business environment across markets,” Ngeny Biwott, KCB Group’s chairman, said during the release of the bank’s financials Thursday.

“The full effect of the law capping interest rate in Kenya marked by a slow business environment on account of the general election negatively hit businesses and the economy at large.”

The lender’s total non-interest income increased two per cent to Sh23 billion. This was mostly attributable to a growth in fees and commissions unrelated to loans and advances which increased by Sh3 billion to Sh9.1 billion.

ICT banking

Joshua Oigara, the lender’s chief executive, said the growth in this income line resulted from the bank’s investment in ICT-based financial solutions focused on enhancing the customer experience.

For instance, the KCB Group closed the year under review having disbursed over Sh30 billion to more than 13 million customers through its mobile platform, Mr Oigara noted.

At least 57 per cent of the banks transactions are on now being done through this platform; 15 per cent through the agents; 10 per cent via ATMs and another five per cent on various point of sale terminals. Just 13 per cent of transactions are done at branch level.

As a consequence of this continuing move to ICT-powered channels, the lender undertook a cost-cutting program during the year to reel in expenses and improve efficiency.

This exercise saw the lender total expenses increase five per cent to Sh42.3 billion, from KShs.40.4 billion recorded the previous year.

“In light of industry and market conditions, we are alive to the fact that we must run our business more efficiently and reduce costs to meet our long-term financial targets,” said Mr Oigara.

“We are positioned for further growth across our business portfolio through leveraging automation, partnerships, digitization to sustain growth with the aim of delivery of enhanced value to our shareholders and customers.”

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