KCB Group Plc has announced a remarkable financial turnaround, with a significant 86 percent increase in profit after tax for the first half of 2024, reaching KShs. 29.9 billion. This upsurge from KShs. 16.1 billion in the same period last year highlights the Group’s robust performance amid challenging economic conditions.
The bank’s balance sheet also showed a healthy expansion, growing by 6 percent to KShs. 1.98 trillion, up from KShs. 1.86 trillion. This positions KCB as the most profitable financial institution in East Africa, retaining its leadership by asset size.
KCB Group’s profitability was bolstered by strong revenue growth across its business segments, with both funded and non-funded income lines contributing significantly. Notably, the Group’s subsidiaries, excluding KCB Bank Kenya, have increasingly contributed to the overall financial performance, with a notable 37.8 percent share in pretax profits and 34.4 percent in total assets. This indicates the benefits of the Group’s diversification into markets beyond Kenya.
In a landmark move, the Group’s Board has recommended an interim dividend of KShs. 1.50 per share, totaling KShs. 4.8 billion. This is the largest interim dividend in KCB’s history, signaling strong financial health and a commitment to shareholder returns.
Group CEO Paul Russo highlighted the resilience of KCB amidst a challenging operating environment, particularly in Kenya. “We delivered a commendable first half of the year, despite strong headwinds, thanks to the goodwill and confidence from our customers and the dedication of our staff,” Russo said. He expressed optimism for the second half of the year, citing the Group’s strategic focus on transformation and expected economic improvements.
The Group’s total assets grew by 6 percent to KShs. 1.98 trillion, driven by stable customer deposit growth which closed at KShs. 1.49 trillion. Net loans and advances saw a 7 percent increase to KShs. 1.03 trillion, reflecting additional facilities extended to support business activities.
Revenue streams showed robust growth, with net interest income rising by 35 percent due to improved yields and increased lending. Non-funded income grew by 21 percent, fueled by digital banking, FX trading, and enhanced contributions from the Group’s DRC-based subsidiary, Trust Merchant Bank (TMB).
Despite the strong performance, the Group faced a 20 percent increase in provisions due to non-performing loan (NPL) downgrades, affected by currency translation and downgrades in Kenya. The gross NPL book stood at KShs. 212 billion, with an NPL ratio of 18.5 percent . Provisions were increased to mitigate the impact of these NPLs, and the regulatory coverage ratio improved to 104.3 percent.
Operational costs were managed effectively, with a 9.6 percent increase due to business growth and inflation, bringing costs to KShs. 44.3 billion. The cost-to-income ratio improved significantly to 46.8 percent, down from 55.3 percent, reflecting efficient cost management alongside strong income growth.
The Group’s return on equity improved to 25.5 percent, up from 15.9 percent, while shareholders’ funds grew by 14 percent to KShs. 248.2 billion. This growth highlights a value gap between the book and market valuations, presenting a favorable entry point for new and existing shareholders.
KCB Group maintained strong capital cushions, with core capital as a proportion of total risk-weighted assets at 17.8 percent, well above the statutory minimum of 10.5 percent . The total capital to risk-weighted assets ratio stood at 20.3 percent, exceeding the regulatory minimum of 14.5 percent . All banking subsidiaries, except NBK, complied with local regulatory capital requirements.
Group Chairman Dr. Joseph Kinyua praised the Group’s adaptability and strength amid global and local challenges, emphasizing the improved asset growth and capital adequacy ratios. The Board’s decision to recommend a record interim dividend reflects the Group’s robust performance and commitment to its shareholders.
In recent developments, KCB Group has reinforced its commitment to sustainability and ESG priorities. The Group’s 2023 Sustainability and ESG Report, launched this week, outlines progress on sustainable business practices and corporate social investments. KCB also remains a leading green financier and has advanced its social impact platform, ‘2jiajiri.’
Additionally, KCB and Access Bank PLC are progressing with a binding offer for Access Bank to acquire 100 percent of National Bank of Kenya Limited (NBK). The completion of this transaction depends on customary conditions and regulatory approvals.
KCB’s market leadership has been recognized with top accolades, including being listed among Kenya’s top three most valuable brands by Brand Finance and receiving several awards for its role in East Africa’s economic transformation. Group CEO Paul Russo was honored with the African Business Leader of the Year Award 2024, acknowledging his transformative influence on the region’s financial services sector.
This impressive performance underscores KCB Group Plc’s resilience, strategic execution, and leadership in East Africa’s banking industry.