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KCB Quarter financial report: Interest cap and political tension to blame for Low interest income

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Fees and commissions saw KCB Group’s total non-interest income read at Ksh 17.5 billion an increase of 18.4% against the same period in 2016. The financial institution posted a pre-tax profit of 22.4 billion in the third quarter ending September 30th 2017 a growth of 3.1%compared to the same period last year.

However, interest Income went down 3.6% to Ksh 46.8 billion as a result of interest cap and an economic slowdown following the electioneering season. This was partially offset by a reduction in interest expense by 10.9% bringing net interest income to KShs. 35.7 billion, a decline of 1% against third quarter in 2016.

Total operating income grew by 4.6% on the back of non-interest income to close the quarter at KShs. 53.2 billion cushioning the Group’s earnings in a challenging economic environment. KCB Group CEO and MD, Mr. Joshua Oigara, said the full effect of the law capping interest rate in a quarter marked by a slow business environment on account of the general election in Kenya – the Group’s largest market – was mitigated by growth in the loan book, prudent management of cost of funds and focus on non-branch channels.

Highlights

  • Total Assets improved by 14.5% from KSh 562.3B to KShs. 643.8B
  • Net Loans and Advances up 15.1% from KShs. 364.3B to KShs. 419.5B
  • Net Non-Performing Loans and Advances down 14.7% from KShs. 13.05B to KShs. 11.1B
  • Customer Deposits increased 15.6% from KShs. 429.3B to KShs. 496.3B
  • Shareholder funds grew 13.0% from KShs. 91.3B to KShs. 103.2B
  • Total Capital up 18.3% from KShs. 86.2 B to KShs. 101.9B

KCB Group’s non-interest income currently accounts for 32.9% of the total operating income, underscoring the growing importance of income derived from non-branch revenue channels. The Group expects alternative revenue channels to be the growth driver in the next few years.

KCB has pegged its future on its Fintech strategy that rides on a digital platform to provide seamless services for its customers. Thanks to technology, KCB Group acquired over 10 million customers on its mobile platform either directly or through partnerships over the past 5 years. Currently, non-branch channel systems—Mbenki, KCB M-PESA, Mobi and payments— account for 85% of total transactions. Since inception of the flagship KCB M-Pesa platform in March 2015, the Bank has disbursed over KShs. 20.3 billion in loans to over 8 million customers on their mobile phones.

KCB Group’s liquidity position stood at 37.7% in the third quarter of 2017 and was 17.7% above the CBK’s statutory minimum requirement. The Group’s capital strength remains robust with a total capital of KShs. 101.9 billion in the third quarter of 2017 up from KShs. 86.2 billion in 2016.

The Group’s core capital as proportion of its total risk weighted assets was 6.9% above the Central Bank of Kenya statutory minimum of 10.5% a further indicator that Group was on a firm capital footing. Overall the bank’s total capital as a proportion of its risk weighted assets stood at 18.7% this year compared to 17.9% in the same period in 2016.

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Melissa Daniels
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