KCB Group has reclaimed its position as East Africa’s most profitable bank, posting a remarkable 69% growth in net earnings for the first quarter of the year.
The bank’s Q1 results, released on Wednesday, reveal that net profits nearly doubled to Sh16.5 billion from Sh9.8 billion during the same period in 2022.
Paul Russo, KCB Group’s managing director and CEO, described the performance as historic, citing revenue growth across the bank’s network. This growth pushed the balance sheet to Sh2 trillion, up from Sh1.6 trillion a year earlier.
Total revenues surged by 31.6% to Sh48.5 billion, driven by both funded and non-funded income streams. Non-funded income, accounting for 36% of total revenues, was bolstered by increased transaction volumes, customer confidence, and the adoption of digital banking and alternative channels.
“Despite challenging conditions across the region, we achieved strong revenue performance by maintaining prudent credit, liquidity, cost, and risk management. The continued growth in consumer deposits reflects our clients’ confidence in our brand,” Russo said.
Russo highlighted the lender’s investments in digital and payment capabilities and its regional expansion strategy, which continue to yield impressive results. He noted that KCB Group would leverage these capabilities through syndication of facilities and centers of excellence to enhance operational efficiency.
“Under our shared services model, we prioritized automation of key processes, expanded our self-service channels, and streamlined loan application processes to enhance customer experience and reduce friction,” Russo added.
Key financial metrics showed significant improvement in Q1. Customer deposits rose by 25.4% to Sh1.5 trillion, mainly from the Kenyan market, while customer loans increased by 12.2% to Sh1.13 trillion, driven by additional lending to support business activities.
The group’s diversification strategy is paying off, with businesses outside KCB Bank Kenya contributing 17.9% of pre-tax profits and 13.1% of total assets.
Operational efficiency improved as the cost-to-income ratio dropped to 43.3% from 51.2%, thanks to strong income growth and strict cost management. However, total costs rose by 11.3% to Sh21 billion, primarily due to inflationary pressures in East Africa and globally.
Loan impairments increased by 53.4% due to downgraded facilities, leading to a gross non-performing loan (NPL) book of Sh205.3 billion and an NPL ratio of 18.2%. This rise was attributed to downgrades in Kenya and the impact of foreign currency translations. The group is focusing on improving asset quality through measures aimed at reducing NPL ratios in the short and long term.
Shareholders’ funds grew by 11% to Sh238.6 billion from Sh214.8 billion the previous year. This growth highlights the value gap between the group’s book and market valuations, presenting an attractive opportunity for new shareholders and growth prospects for existing ones. Return on equity improved from 19.7% to 28.6%.
KCB Group remains optimistic about its business prospects for the rest of the year. “We have made significant progress in sustaining superior shareholder value by delivering strong financial performance while building a future-proof business. Prudent capital deployment has ensured our resilience and ability to deliver for our stakeholders,” said KCB Group Chairman Joseph Kinyua.
The Group maintained a robust capital profile, with a core capital to risk-weighted assets ratio of 15.7%, well above the statutory minimum of 10.5%. The total capital to risk-weighted assets ratio was 17.8%, exceeding the regulatory minimum of 14.5%.
All banking subsidiaries complied with local regulatory capital requirements, except for NBK.
