What you need to know:
KCB, the country’s biggest bank by assets, made a net profit of Sh7.5 billion down from Sh12.7 billion the year before, citing loan defaults due to Covid-19 impact.
The CEO Joshua Oigara speaks on the bank’s outlook.
KCB Group’s net earnings dropped by a staggering 40.4 percent in the half year ended June, indicating the impact of coronavirus-related defaults and loan restructuring on the banking industry.
The country’s biggest bank by assets said it made a net profit of Sh7.5 billion in the review period compared to Sh12.7 billion the year before, attributing the performance to increased provisioning for bad debt.
KCB Group CEO Joshua Oigara spoke with Njiraini Muchira after the bank announced its half-year results this past week.
Question: KCB has posted a 40 per cent decline in profitability in the first half of the year. Was this expected?
The Covid-19 pandemic was unprecedented, but the performance is better than our expectations. In our forecast, we had expected 33 per cent of our total loan portfolio to be affected by the pandemic. Of our Ksh560 billion ($5.1 billion) loan book, we had expected up to Ksh170 billion ($1.5 billion) to be impacted. We had a situation that badly affected our customers. Although our numbers went down by 40 per cent, we thought our business could have been affected by as much as 75 per cent.
How did international subsidiaries perform during the period?
They have done quite well considering that last year we had a problem in Uganda where one of our big clients delayed in making payments. This has now been resolved.
Overall performance of the subsidiaries was up by 22 per cent compared with last year. In Tanzania and Burundi we didn’t see major issues on Covid-19 restrictions, but it’s still too early to call. In Tanzania we have opted to be conservative, and our profitability in the country was down 30 per cent because we increased our provisions. Is the first half performance a pointer to what investors should expect for the rest of the year? Not really. We remain optimistic going to the second half because if you look at our balance sheet there is a 17 per cent growth in income, loans and advances increased by 17 per cent, customer deposits were up 35 per cent and total assets by 28 per cent.Based on this, we should have a better […]