Kenya Commercial Bank Group has posted a pre-tax profit of Shs231.7 billion in the first quarter ending March 31, 2017.
The adverse impact of the interest capping law was cushioned by a 27 per cent reduction in interest expense, 20 per cent growth in non-interest income and prudent cost management that limited cost growth to below inflation.
“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 KCB Group Chief Executive Officer Joshua Oigara.
The Group’s non-interest income was up 20.3 per cent from Shs161.7 billion Uganda currency in the first quarter of 2016 to Shs196.9 billion within the same period this year, underscoring the growing importance of income derived from alternative revenue channels.
Non-interest income currently accounts for 35 per cent of the group’s total operating income and is expected to be the growth driver going forward. The group has pegged its future on its finech strategy that rides on a digital platform to provide seamless services for its customers.
“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,” said Mr. Oigara.
KCB has made significant advances in adopting technology resulting to more than 79 per cent of the transactions performed outside the branches. Mobile banking transactions have increased by 37 per cent, Agency banking increased by 50 per cent and Point of Sale transactions increased by 33 per cent in quarter 1 2017 compared to the same period last year. Over the same period, branch transactions have reduced by 27 per cent.
“This year, we will make investments to increase mobile banking customers to over Shs15 million, grow the agency network to over Shs20, 000.
“We need to continually manage our capital and risks to keep the business growing while delivering on our targets. Our focus will be on generating higher growth, and over the next three years, we will be seeing a bigger and more efficient bank” said Mr. Oigara.
KCB group continues to face challenges in South Sudan, due to the hyperinflation situation in the economy. The continued depreciation of the currency (South Sudanese Pound) has had a negative impact on our results. “The group continues to monitor South Sudan’s overall performance and appropriate optimization measures are being executed,” said Oigara.
In Uganda however the market is facing an improved market environment as Bank of Uganda continues to reduce the Central Bank Rate. In April it was reduced to 11 percent in in order to support the private sector credit and the economic growth momentum noting that “core inflation is forecast to remain around the medium-term target of 5 per cent.”
Other funding opportunities include the European Bank lent Shs38 billion to KCB Bank Uganda for onward lending to local small and medium scale enterprises. Mathias Muhimbisa, the Executive Director KCB Bank Uganda said that the facility will enable SMEs have access to loans ranging from Shs50 million to Shs1 billion to fund expansion of their business in terms of additional projects.
“SMEs will benefit from the reduced interest rate for fairly long term borrowing of 5-7 years” noted Muhimbisa