KCB Group, one of East Africa’s leading financial institutions, has reported a 20% drop in net profit for the first half of 2023, citing factors such as staff restructuring costs and significantly higher provisions for loan defaults.
The bank’s net profit for the period fell to Sh15.5 billion from Sh19.5 billion in the same period the previous year. Despite a healthy growth of 22.2% in revenue to Sh73.1 billion from its main business, the rise in provisions overshadowed earnings.
KCB’s operating expenses surged by 60% to Sh50.61 billion during this period. Notably, provisioning for non-performing loans (NPLs) saw a significant jump of 2.4 times to Sh10.2 billion from Sh4.32 billion. This, along with increased staff costs and other operating expenses, contributed to the rise in operating costs.
According to KCB Group’s CEO, Paul Russo, the drop in net profit was due to aggressive provisioning of loans, inherited legal claims, and staff restructuring costs. However, he remains optimistic about the future and expects improved performance in the second half of the year.
KCB’s net interest income grew by 12.1% to Sh45.5 billion, supported by a 32.3% expansion of the loan book to Sh964 billion. Non-interest income also grew by 30.3% to Sh27.56 billion.
The bank managed to reduce its NPL ratio to 17.4% from 21.5% in the same period last year, attributed to efforts to address loan defaults.
KCB’s total assets surged by 54% to Sh1.84 trillion, driven by the acquisition of Trust Merchant Bank (TMB) in December. Despite this growth, Equity Group remains ahead of KCB in terms of profitability.
Joseph Kinyua, Chairman of KCB Group, stated that the bank is well-positioned for future growth, supported by its strong governance, digital capabilities, regional presence, and dedicated staff.