KCB Group has reported a net profit of Ksh.19.6 billion for the full year ending December 2020, a 22 percent decline from the Ksh.25.2 billion recorded a year earlier as higher provisions for loan losses and subdued economic activity associated with the COVID-19 pandemic hit business performance.
In the period under review, the Group’s total income increased by 14 percent to stand at Ksh.96 billion, compared to Ksh.84.3 billion reported in December 2019. This was largely driven by funded income which grew by 21 percent largely as a result of interest from Government securities which increased by 65 percent compared to the previous year.
Non-funded income remained flat to close at Ksh. 28.1 billion on the back of income from trading activities and strong foreign exchange earnings. The performance of non-funded income was partially subdued by the waiver on mobile transaction fees.
“The pandemic significantly affected our business across the markets we operate in, with most of them going into some degree of lockdown. The negative impact on the economy drastically reduced our customer’s ability to operate necessitating loan restructures. Signs of recovery were evident at the tail end of the year with increased business activity, and we believe this momentum will carry into 2021,” said the KCB Group CEO and MD Joshua Oigara.
While the Group maintained a stringent cost management approach to cushion the business, operating expenses were up 12 percent mainly due to the full-year consolidation of the National Bank of Kenya (NBK), a subsidiary acquired at the end of 2019. Excluding NBK, expenses remained flat at Ksh.36.6 billion boosted by cost savings initiatives undertaken in the year.
The operating environment caused a significant increase in credit risks which pushed up the Group’s cost of risk leading to an increase in loan provisions to Ksh. 27.1 billion. This deterioration in the economy also had a negative impact on the Group’s non-performing loans (NPLs) book which rose to Ksh.96.6 billion up from Ksh. 63.4billion in 2019, with the NPL ratio rising to 14.7, percent mainly due to COVID-19 related downgrades.
Similarly, the Group inched closer to crossing the Ksh.1 trillion balance sheet mark, booking Ksh.987.8 billion in assets, a 10 percent jump from the previous year, contributed by loan book growth, funded by increased customer deposits. Net loans and advances were up 11 percent to close the period at Ksh. 595.3 billion while customer deposits were up 12 percent to Ksh. 767.2 billion.