Central Bank
Stanbic Holdings

KCB profit up to Sh5bn on increased lending

Kenya’s biggest bank said it had made Sh5.1 billion net profit in the review period compared to Sh4.5 billion a year earlier, riding on a 5.8 per cent loan book growth that raised interest income 11 per cent to Sh15.6 billion.

KCB also benefited from lower loan loss provision of Sh600.2 million, down from Sh958.1 million in the same quarter last year despite a 36.1 per cent surge in gross defaults to Sh43.7 billion.

KCB is the second bank to report its first quarter results that capture the impact of the more conservative accounting rules, dubbed IFRS 9, which came into force at the beginning of the year and were expected to raise provisions for bad debt through anticipation of defaults.

Stanbic Bank Kenya, the local banking unit of Stanbic Holdings, also announced a near-doubling of net profit to Sh1.9 billion in the same period on the back of higher non-interest income and lower loan loss provision.

KCB’s ratio of total capital to total risk weighted assets dropped by 1.3 percentage points in the review period as provisions for default started to eat into its capital in line with the stricter accounting rules.

“Total capital adequacy ratio dropped by 130 basis points largely driven by the impact of the adoption of the IFRS 9, which came into effect from January 2018,” KCB said in a statement.

The move left the ratio above the minimum requirement of 14.5 per cent by 0.8 percentage point, the thinnest buffer it has recorded in recent times.

“The outlook for the year is favourable with an expected improvement in economic conditions leading to a pickup in investments across the East African region,” Mr Oigara said. “The business remains strong and our portfolio mix gives us an opportunity to tap into this recovery.”

KCB said its long term debt fell five per cent to Sh22.5 billion. Customer deposits grew 8.6 per cent to Sh496.3 billion, a move that saw interest expenses rise 12.5 per cent to Sh4.2 billion.

Operating expenses rose 1.7 per cent to Sh9.4 billion. The lender also deferred taxes amounting to Sh786.4 million in the quarter under review.

Kenyan banks will take a full hit from provisions for new loans issued in 2019 and beyond after the Central Bank of Kenya (CBK) refined its capital waiver rules that has mitigated the impact of IFRS9 in the short term.

The banking sector regulator says incremental provisions –limited to good loans outstanding as of December 31, 2017 and those issued this year— may be added back to earnings for purposes of computing core capital.

“All provisions under the expected credit loss (ECL) model for facilities/loans issued after 2018 shall not be added back for purposes of computing regulatory capital,” the CBK said in a circular.

Share this Post