Kenyan lenders post impressive full-year growth

The banking sector remained upbeat yesterday as top listed lenders continued to announce improved profits and dividend payout for the year ended December 31.

Co-operative Bank increased its dividend offering to shareholders by 50 per cent after posting a Sh22 billion net profit for the year as KCB Group trimmed dividends by a third.

Coop Bank’s profit rose by 30 per cent as KCB’s income rose by 19 per cent signalling a bumper harvest for banks despite the political uncertainty and inflation, as lenders started to recoup on the back of Covid-10 shocks that had been pulling them down.

“The board of directors has recommended a dividend of Sh1.50 per share subject to approval by the board of directors,” said Co-op MD Gideon Muriuki. Coop Bank’s operating income grew by 17 per cent to Sh71 billion in the period as total assets grew to Sh607 billion from Sh579.8 billion in the same period last year. Net loans and advances grew to Sh339.4 billion, a 9.4 per cent growth from Sh310.2 billion in 2021.

Loan loss provisions

The lender said it has increased its loan loss provisions to Sh8.7 billion to deal with the high proportion of bad loans in the industry. On its part, KCB Group cut dividends by a third despite the net profit rising 19.5 per cent to Sh40.8 billion in the financial year that ended in December.

KCB is proposing a final payout of Sh1 per share, which is equal to January’s interim payout, bringing the combined payout to Sh2 per share or a total of Sh6.4 billion.

The payout is a 33 per cent cut from the Sh9.64 billion that was paid on the previous year’s performance when the net profit was Sh34.2 billion. KCB Group announced a 19 per cent rise in profits for the full year ending December 2022.

The lender recorded Sh40.8 billion in profit after tax, a 19.5 per cent increase from the Sh34.2 billion reported in the previous year.

The bank attributed the growth to funded and non-funded income streams. Revenues increased by 19.6 percent to Sh129.9 billion, with net interest income growing by 11.5 percent driven by earning assets. Non-funded income grew by 39.8 per cent largely from trade finance income, lending fees and commissions.

The profit before tax contribution of other subsidiaries, excluding KCB Bank Kenya, increased to 17 per cent from 13.9 per cent in 2021, riding on organic growth in the subsidiaries and increased scale through BPR Bank Rwanda and Trust Merchant Bank (TMB), the newest DRC-based subsidiary of KCB Group.

“The business benefited from a vibrant core banking business, growth of new business lines and accelerated digital transformation to post this record performance”, said KCB chief executive Paul Russo.

“Overall, we have positive momentum, and we shall build on this and ensure that we make significant step changes in culture and performance, across all our business units. Despite a challenging operating environment, the belief in our people, and successful integration of TMB makes a good case for better performance” he added. Revenues increased by 19.6 per cent to Sh129.9 billion, driven by net interest income which grew by 11.5 per cent supported by earning assets.

Non-funded income grew 39.8 per cent largely from trade finance income, lending fees and commissions.

On the balance sheet side, total assets stood at Sh1.55 trillion, growing 36.4 per cent on higher in loans and investment in government securities and funded by growth in customer deposits and additional borrowings. However, costs were up 24.1 per cent compared to the previous year, on account of increased business activities and the impact of BPR and TMB acquisitions. Provisions also increased marginally by 1.7 per cent compared to the previous year.

On asset quality, the ratio of non-performing loans (NPL) stood at 17.3 per cent, largely driven by downgrades from the KCB Kenya business. Gross NPLs stood at Sh161.2 billion.  The bank noted that while both the NPL ratio and stock show an increase compared to the previous year, there is a remarkable reduction from the peak numbers in June 2022.

Economic climate

The overall economic growth was an important factor affecting the performance of lenders whereby a robust economic climate increases demand for loans and other banking services.

Speaking on digital footprint, Muriuki said through its digital channel strategy, the bank has successfully moved 92 per cent of all customer transactions to alternative delivery channels, a 24-hour contact centre, 542 ATMs, mobile and internet banking and over 17,000 network of Co-op kwa Jirani agents.

“We have successfully migrated our customers to the Omni-channel, integrating accessibility and user experience. Our omnichannel interfaces online banking through personal computers, mobile phones and USSD availing our services to all customers through their preferred channel yet retain the same experience from wherever they are,” he added.