The Kenya Commercial Bank (KCB) has announced a 5 percent growth in after tax profit to KSh12.7 billion for the first half of 2019 ending June, as compared to Ksh12.1 billion in the same period last year.
The lender attributed the growth to expanded loan book and increased mobile channel activity.
Releasing the results on Thursday, KCB CEO Joshua Oigara said that prudent cost management further supported the performance despite a relatively tough business environment.
“We had a strong second quarter and witnessed continued growth across our businesses segments. The investment in technology generated positive return and further helped drive efficiency and deepen access to affordable financial services in all markets,” noted Oigara.
Channel transactions done outside the branch increased to 96 percent of total transactions, up from 87 percent in 2018 driven by mobile channel.
Net interest income increased by 5 percent to KSh25.4 billion, attributable to a 14 percent expansion of the loan book and a marginal 2 percent increase in the interest expense.
Fees and commissions increased by 31 percent to KSh8.9 billion as revenues from digital channels in particular KCB M-PESA grew significantly powered by the new platform launched late last year.
The value of loans disbursed via the service during the period of review increased from KSh14.9 billion in the first half of 2018 to KSh66.7 billion in the first half of 2019.
Total operating income was up 8 percent to KSh38.6 billion from KSh35.6 billion on the back of strong non-funded income which grew 15 percent to KSh13.1 billion.
Operating expenses increase of 2.6 percent was well below inflation to close at KSh17.6 billion. Loan loss provision on the other hand saw a significant increase to KSh3 billion from KSh0.8 billion reported same period in 2018.
“This big increase in loan provision is mostly due to impact of day 1 adjustments done during implementation of IFRS 9 last year. Our cost management initiatives continue to bear fruits and is now becoming embedded in the culture,” said KCB Group CFO Lawrence Kimathi.
The Group’s balance sheet increased by 12 percent to KSh746.5 billion, with deposits up 7 percent to Ksh563.2 billion supported by continued strong growth in personal and transaction accounts.
The loan book surged 14 percent to Ksh478.7 billion, reflecting the strong lending pipeline primarily driven by the retail and corporate banking customer segment.
The ratio of non-performing loans to total loans declined to 7.8 percent from 8.4 percent, well below the industry average of 12.7 percent.
The core capital as a proportion of total risk weighted assets closed the period at 18.0 percent against the Central Bank of Kenya statutory minimum of 10.5 percent. Total capital to risk-weighted assets stood at 19.4percent against a regulatory minimum of 14.5 percent.
“Looking forward, we expect to build momentum in the second half of the year in line with increased economic activity across sectors, which should deliver top line growth and assist cushion asset quality,” said KCB Group Chairman Andrew Kairu.
This comes as a good indicator to the lender as it plans to finalize the transfer of part of the assets and liabilities of Imperial Bank In Receivership Limited as well as complete the takeover bid for National Bank of Kenya by the end of the current quarter.
Following the results, the Board of Directors approved a payment of an interim dividend of KSh1.00 per share. Shareholders will be paid the dividend in November 2019.