KCB Group has posted a significant 49% increase in its profit after tax for the third quarter of 2024, reaching Ksh 45.8 billion. This marks a considerable improvement from the Ksh 30.7 billion recorded over the same period last year. The strong financial performance is attributed to increased revenues, which rose by 22% to Ksh 142.9 billion.
The bank’s net interest income grew by 24%, driven by improved yields and increased lending to key segments. However, the bank noted that the rise in interest expenses, primarily due to the higher cost of funds, partially offset this growth. Despite the pressure from rising costs, the robust performance of non-funded income (NFI) significantly contributed to the overall profitability. NFI saw strong results from foreign exchange income, transaction fees, and a surge in revenues from Trust Merchant Bank (TMB), KCB’s subsidiary based in the Democratic Republic of Congo (DRC).
The growth in KCB’s regional subsidiaries, excluding KCB Bank Kenya, also played a crucial role in this performance. The regional businesses contributed 36.6% of the group’s profit after tax and 34% of total assets. This demonstrates KCB’s growing regional footprint and its ability to generate revenue from its subsidiaries outside Kenya.
One of the standout figures for the group was its growth in customer deposits, which surged to Ksh 1.5 trillion. This increase helped the group close the quarter with total assets amounting to Ksh 2 trillion. The bank’s net loans and advances also grew to Ksh 1.1 trillion. The expansion in retail sector lending contributed significantly to this growth, while the impact of the appreciation of the Kenyan shilling on foreign currency-denominated loans was mitigated.
Speaking on the results, Paul Russo, KCB Group’s CEO, highlighted the bank’s deep understanding of local markets and its tailored financial solutions. “We have made deliberate investments to support regional trade and connect millions of people across the world to opportunities on the African continent and beyond while making a positive social impact in the communities,” Russo stated.
Despite the impressive growth, KCB Group faced challenges with its non-performing loans (NPLs). During the period under review, the bank’s NPL stock hit Ksh 215.3 billion, prompting the lender to increase provisions by 12.2%. This increase in provisions is a precautionary measure to cover potential losses from the rising NPLs. It underscores the challenges the bank faces as it navigates an environment of high-interest rates and a broader economic slowdown.
The rise in non-performing loans is a concern for many financial institutions in the region, with banks needing to balance growth with risk management. However, KCB Group’s continued focus on strengthening its regional presence and investing in key markets provides a cushion against such risks. The bank’s ability to generate significant non-funded income and its strong asset base also give it a competitive edge in the financial sector.
Looking ahead, KCB Group is well-positioned to continue its growth trajectory. With its expanding regional footprint, increasing customer deposits, and diverse revenue streams, the bank is on track to maintain its strong performance. Nevertheless, it will need to address the challenges posed by non-performing loans and the evolving economic landscape to ensure sustained profitability in the coming quarters.
In conclusion, KCB Group’s near-doubling of net profit in Q3 2024 is a testament to its strong operational execution and the resilience of its business model. The bank’s ability to adapt to local market conditions and expand regionally positions it as a leader in the African banking sector. However, careful management of credit risk and a focus on sustainable growth will be crucial as it navigates the challenges ahead.
