KCB Group Plc, East Africa’s largest commercial bank, has reported an impressive 86% increase in profit after tax, reaching KShs. 29.9 billion for the first half of 2024. This significant growth, up from KShs. 16.1 billion in the same period last year, underscores KCB’s ability to thrive despite a challenging economic landscape. The bank’s balance sheet expanded by 6%, with total assets now at KShs. 1.98 trillion, reaffirming KCB’s status as the region’s most profitable financial institution.
Strategic Revenue Growth Drives Success
KCB’s remarkable profitability is driven by robust revenue growth across both funded and non-funded income streams. Net interest income increased by 35%, fueled by higher yields and increased lending to key sectors. Additionally, non-funded income rose by 21%, bolstered by digital banking, foreign exchange trading, and strong contributions from Trust Merchant Bank (TMB), KCB’s subsidiary in the Democratic Republic of Congo (DRC).
The bank’s strategic diversification beyond Kenya has proven fruitful, with subsidiaries contributing 37.8% to the Group’s pretax profits and 34.4% to total assets. This diversification has been pivotal in sustaining growth and mitigating risks across different markets.
Record Dividend Payouts for Shareholders
Reflecting its robust financial health, KCB’s Board has recommended an interim dividend of KShs. 1.50 per share, totaling KShs. 4.8 billion—the largest interim dividend in the bank’s history. This payout underscores KCB’s commitment to delivering long-term value to its shareholders.
Challenges in Asset Quality and Cost Management
Despite the positive financial performance, KCB faced challenges with non-performing loans (NPLs), which totaled KShs. 212 billion, pushing the NPL ratio to 18.5%. In response, the bank increased provisions by 20% to cushion the impact and improve its regulatory coverage ratio to 104.3%. KCB is actively working to manage risks and enhance asset quality through targeted measures.
On the cost front, KCB successfully contained expenses to a 9.6% increase, closing the period at KShs. 44.3 billion. The bank’s cost-to-income ratio improved significantly, falling to 46.8% from 55.3%, driven by strong income growth and stringent cost control measures.
Robust Capital Position and Improved Returns
KCB’s capital position remains strong, with core capital as a proportion of total risk-weighted assets at 17.8%, well above the statutory minimum of 10.5%. The total capital to risk-weighted assets ratio was 20.3%, exceeding the regulatory minimum of 14.5%. This solid capital base reflects KCB’s financial strength and its capacity to support future expansion.
Return on Equity (ROE) improved to 25.5%, up from 15.9%, while shareholders’ funds grew by 14% to KShs. 248.2 billion. This signals a significant value opportunity for both current and prospective investors.
Looking Ahead: Strategic Focus on Growth and Sustainability
KCB Group CEO Paul Russo expressed optimism about a stronger second half of 2024, driven by the Group’s “Transforming Today Together” strategy and the expected economic turnaround in its operating markets. The strategy emphasizes cost optimization and leveraging the Group’s diverse business portfolio for sustained growth.
KCB’s market leadership continues to be recognized, with the bank recently ranked among Kenya’s top three most valuable brands by Brand Finance. CEO Paul Russo’s leadership was also acknowledged, as he was named African Business Leader of the Year 2024 by African Leadership Magazine for his transformative influence on East Africa’s financial services sector.
Commitment to Sustainability and Social Responsibility
KCB remains committed to sustainability and Environmental, Social, and Governance (ESG) priorities. The Group has been actively supporting 14 Sustainable Development Goals through corporate social investments and sustainable business practices. The launch of the 2023 Sustainability and ESG Report highlights KCB’s progress and future targets, positioning the bank as a leading green financier in the region.
Conclusion
KCB Group’s outstanding performance in the first half of 2024 showcases its resilience and strategic foresight, enabling it to navigate challenges and deliver substantial financial results. With a focus on diversification, cost management, and sustainability, KCB is poised to continue its leadership in East Africa’s financial sector, setting new benchmarks and driving economic growth across the region.
