KCB Group Plc has recorded a 6% growth y/y profits to Ksh19.2 billion net profit for the third quarter ending September 30,2019. In the results, Group CEO Joshua Oigara emphasized on sustained business ethics & banking standards to the impressive results.
In the results, the positive view, Operating expenses (before provisions) were subdued (-0.7% y/y) as the 6.2% y/y rise in staff costs was outpaced by a 7.1% y/y decline in other operating expenses. Additionally, 95.0% of transactions are now undertaken outside the branch, with the bank witnessing growth in non-branch revenue (141.0% y/y) to KES 8.6Bn. The total mobile loan book stands at KES 159.3Bn and this drove the 16.9% y/y NIR growth (78.9% y/y growth in fees and commissions on loans). Consequently, NIR contribution rose (209 basis points y/y), for the third consecutive quarter, to 35.2%. Overall, the Cost-to-Income ratio (CTI) declined 482 basis points y/y to 44.7%.
“NIM remains relatively strong at 8.2% compared to the sector average, despite witnessing a 27bps q/q decline on account of a 44bps decline in the yield on interest earning assets.” Genghis Capital
On the negative view, Gross None Performing Loans [NPLs] rose 8.9% q/q to KES 42.6Bn, with the NPL ratio increasing across both the corporate (10.4% compared to 9.5% in 1H19) and SME (14.7% compared to 14.1% in 1H19) segments. Consequently, the NPL ratio rose 51bps q/q to 8.3%.
“NBK has access to cheap government deposits. This has enabled the bank to keep its cost of deposit low” Aib Capital
The increased usage of alternative channels has presented an opportunity for KCB to reduce cost and increase its non interest income. 95% of transactions are carried out outside the branch, while 75% of the bank’s total transactions take place on the mobile platform. KCB has used its mobile platform disburse loans which attract higher fees and have therefore helped to grow its non-interest income, a trend that is expected to continue. NBK also presents an opportunity for the bank to grow its non-funded income. As at 3Q19, NBK had a non-interest income to total operating income ratio of 24%. We attribute this to the fact that the bank didn’t cross-sell its products.
Data: Genghis Capital, AIB Capital, KCB Group Plc.