Global credit rating firm, Fitch has affirmed KCB Group’s and its core banking subsidiary KCB Bank Kenya LongTerm Issuer Default Ratings (IDRs) at ‘B+’, citing a steady revenue outlook.
This is after the lender posted growth both in full-year and Q1 earnings.
The lender posted a net profit of Sh34.2 billion in the last financial year, a whopping 74 per cent growth compared to 2020.
Even so, the intentional rating agency retained a negative outlook on the lender due to the ongoing shakes in the global financial market that has propelled global inflation.
“KCB Group’s and KCB Bank’s Long-Term IDRs are driven by their standalone creditworthiness, as expressed by their Viability Ratings (VRs) of ‘b+’,” said Fitch.
KCB Group’s GSR of ‘ns’ reflects Fitch’s view that government support is unlikely to extend to a non-operating bank holding company given its low systemic importance and a liability structure that may be more politically acceptable to be bailed in.
KCB Bank’s rating considers a high propensity of the authorities to provide support to the bank given its systemic importance but also Kenya’s limited financial flexibility, as captured in the sovereign rating
Further, the agency noted that the National Ratings of KCB Group and KCB Bank reflect their relative creditworthiness within Kenya.
Fitch revised KCB Group’s Outlook on the National Long-Term Ratings to stable from negative as it does not expect any change to the entities’ creditworthiness relative to domestic peers’.
On asset quality, the rating agency noted that KCB Group’s asset quality metrics have deteriorated since the pandemic and are weaker than peers.
The banks’ impaired loans remained at a high of 16.3 per cent at end-2021 while total loan loss allowance coverage of impaired loans fell to 57.3 per cent at end-2021, well below the Group’s target of 75 per cent.
Even so, KCB’s profitability recovered strongly in 2021 due to the sharp fall in loan impairment charges (LICs), despite asset-quality pressures.
Fitch expects the Group’s earnings to remain strong given its franchise strengths but expects some pressure on profitability in 2022 from LICs amid elevated impaired loans and moderate provisioning levels.
