KCB Group Plc has posted a net profit of Kes.19.6 billion for the financial year ended 31st December 2020.
This was a 22% decline from the Kes 25.2 billion recorded during the same period in 2019 as higher provisions for loan losses and subdued economic activity associated with the COVID-19 pandemic hit business performance.
The group recorded a 14% increase in income to Kes.96.0 billion, compared to Kes.84.3 billion reported during the same period in 2019. This was attributed to funded income, which grew by 21% largely due to interest from Government securities which increased by 65% compared to the previous year.
Group CEO & MD Joshua Oigara attributed the group’s performance to the economic hardship brought about by the COVID-19 pandemic; however, he expressed hope for the business’s performance.
“The pandemic significantly affected our business across the markets we operate in, with most of them going into some degree of lockdown. The negative impact on the economy drastically reduced our customer’s ability to operate necessitating loan restructures. Signs of recovery were evident at the tail end of the year with increased business activity, and we believe this momentum will carry into 2021,” Joshua Oigara – KCB Group CEO & MD
Non-funded income remained flat to close at Kes. 28.1 billion on the back of income from trading activities and strong foreign exchange earnings. The performance of non-funded income was partially subdued by the waiver on mobile transaction fees.
Additionally, KCB recorded a 12% increase in operating expenses to Kes.43.2 billion. The group attributed the increase to the full-year consolidation of the National Bank of Kenya (NBK), a subsidiary acquired at the end of 2019.
The operating environment caused a significant increase in credit risks which pushed up the Group’s cost of risk leading to an increase in loan provisions to Kes. 27.1 billion. This deterioration in the economy also had a negative impact on non-performing loans (NPLs) book, which rose to Kes.96.6 billion up from Kes 63.4billion in 2019, with the NPL ratio rising to 14.7%, mainly due to COVID-19 related downgrades
The Bank inched closer to crossing the Kes.1 trillion balance sheet mark, booking Kes.987.8 billion in assets, a 10% jump from the previous year. The growth was attributed to loan book growth, funded by increased customer deposits.
Net loans and advances were up 11% to close the period at Kes. 595.3 billion, while customer deposits were up 12% to Kes. 767.2 billion. Shareholders’ equity grew 10% from Kes. 129.7 billion to Kes. 142.4 billion on improved profit for the period.
The Group recorded a total capital of Kes 170.3 billion, representing a total capital to risk-weighted assets ratio of 21.6% against a regulatory minimum of 14.5%. The Group’s core capital as a proportion of total risk-weighted assets closed the period at 18.2% against the Central Bank of Kenya statutory minimum of 10.5%.
KCB has expressed optimism in the performance of the economy despite the prevailing pandemic saying.” The pandemic has accelerated an already rapidly shifting operating landscape accentuated by elevated customer expectations, digital disruption, and intensified competition. Looking ahead into the next 9 months, KCB is optimistic of a gradual economic recovery.”
The Board proposed a final dividend of Kes. 1.00 per share. The group said that the proposal seeks to balance income distribution to shareholders while protecting the bank’s capital in the current environment.