KCB Group Plc. reported KShs.6.3 billion in profit after tax in the first quarter of 2020 ending March. This represents an 8% jump from the KShs. 5.8 billion posted a similar period last year, driven by stronger non-funded income lines and interest income boost due to loan book growth.
Total operating income rose 22% to KShs. 22.95 billion in the period compared to KShs.18.76 billion in Q1 2019. Net interest income was up 18% to KShs.15 billion from additional investments in Government securities and lending. Non funded income surged 31% to KShs.7.9 billion from KShs.6.1 billion, driven by digital banking, improved foreign exchange earnings and additional income from National Bank of Kenya, the newest subsidiary of KCB Group.
Operating expenses increased 22% to KShs.11.1 billion, from KShs.9.1 billon on the back of NBK acquisition, increased depreciation in line with IFRS 16 and annual staff salary increments effected in Q1.
Customer deposits rose 34% to KShs.740.4 billion on the back of NBK acquisition and onboarding of new customers. Customers put in an additional KShs.53 billion into the Bank as deposits for the 3 months from December 2019. The loan book expanded to KShs.553.9 billion, a 19% growth from KShs.464.3 billion reported in Q1 2019.
The Group’s balance sheet remained strong, growing 31% from KShs.725.7 billion to KShs.947.1 billion, well within range of the KShs.1 trillion target by the end of 2022.
Commenting on the results, KCB Group CEO and MD Joshua Oigara said the overall quarterly performance was however below expectations because of a tougher macroeconomic operating environment.
“The operating landscape has further been exacerbated by COVID- 19 immediately shifting our focus to supporting our customers through the crisis, pursuing business continuity and the safety and well-being of our staff and all other stakeholders,” said Mr. Oigara.
“We expect performance in the next two quarters to be impacted as the crisis is affecting the ability of customers to service their loans and reducing the demand for credit. We have taken measures to conserve out capital, manage costs and keep a keen eye on liquidity,” he added.
The continued focus on driving digital transactions saw non branch transactions rise 97% up from 94% in Q1 2019 mainly driven by mobile, internet and agency banking. Non Branch volumes increased by 31% (KShs.445 billion compared to KShs.340 billion) while branch decreased by 8% on channel migration initiatives.
The Group posted a higher provision expense—from last year’s KShs1.2 billion to KShs.2.9 billion—to cover for downgraded facilities, with an expected growth in defaults across key sectors of the economy attributable to the pandemic that has shaken the country’s, regional and global economy.
“We are taking all the necessary precautions to safeguard the safety and well-being of our customers, staff and the general public in the wake of the pandemic. We expect our performance to be negatively impacted by the outbreak as business has been disrupted in all our markets. The crisis has taken toll on all segments of our customers, effectively suppressing demand for credit” said Mr Oigara.
“We are recalibrating our business to focus more on digital banking and excellence in customer experience to give our clients the best service under the current difficult circumstances” he added.