KCB Group Kenya’s largest bank by assets, has posted a 1.9 per cent drop in net earnings for the first quarter on the back of lower interest income as the rate caps regime narrowed lenders’ spreads.
The listed bank said net profit stood at Sh4.54 billion in the three months to March 2017 compared to Sh4.63 billion in quarter one last year.
Joshua Oigara, chief executive at KCB, also blamed the performance on the civil strife, devaluation of Juba’s currency and hyperinflation in South Sudan which impacted the lender’s earnings.
Net interest earnings tanked by Sh514 million to Sh10.3 billion, despite a Sh49 billion bump in loan book to hit Sh395.4 billion as at March 2017.
“We have witnessed an increasingly challenging operating environment across all markets.
“In Kenya, the interest rate caps have made it difficult to price for risk whereas some of our subsidiaries are experiencing high inflation and shortage of foreign currency,” said Mr Oigara.
Non-interest income from fees and commissions as well as forex trading grew by a fifth to hit Sh5.5 billion in the period under review.
Interest paid on deposits declined by 27 per cent to Sh3.8 billion from Sh5.2 billion in March 2015, a pointer that KCB could have shifted customer accounts to transactional accounts to avoid the set seven per cent deposit rate or rejected expensive deposits.
Mr Oigara said the lender is banking on technology to cut operating costs, which surged by Sh446.4 million to Sh9.3 billion in the quarter under review.
“The future lies in leveraging technology to drive efficiencies in our operations in order to serve our customers better with relevant products that meet their expectations,” he said.
Provisions for toxic loans dropped 30 per cent to Sh958 million from Sh1.3 billion in the first three months of last year.
This is despite gross volume of non-performing loans growing to Sh27.4 billion from Sh26.3 billion in March 2016.
On South Sudan, KCB said it is closing some of its 19 branches in the war-torn country as a strategy to protect shareholder wealth, having booked a Sh3.4 billion hit due to hyperinflation in 2016.
“The group continues to monitor South Sudan’s overall performance and appropriate optimisation measures are being executed,” said Mr. Oigara.
Credit: Business Daily