KCB Group has recaptured its spot as the leading bank in Kenya in terms of asset value from rival Equity Bank, despite flat earnings in the first three months of the year.
Results released on Wednesday shows that its assets grew by 39.8 per cent in the three months to March to hit Sh1.63 trillion, trouncing arch-rival, Equity Bank which recorded an asset base of Sh1.53 trillion.
"The contribution of Group businesses excluding KCB Bank Kenya to the overall profitability was up to 35 per cent from 17.2 per cent as investments in regional businesses continued to pay off,'' the lender said in a statement.
The contribution to total assets improved to close the period at 38.2 per cent.
The regional lender completed the acquisition of 85 per cent stake in Trust MerchantBank (TMB) last December.
KCB — already with operations in Rwanda, Burundi, Tanzania, Uganda, and South Sudan— has the right to buy out the remaining shareholders in the 109-branch DRC lender in two years.
TMB contributed Sh1.9 billion in profit before tax in the quarter and 14 per cent to the Group’s total assets.
The bank's Group MD and CEO Paul Russo has also attributed the growth in asset base to strong customer confidence, as the focus shifted to supporting customers navigate the hard economic environment while ring-fencing the business for prospects and growth.
Revenue increased by 26.9 per cent to Sh36.9 billion mainly driven by the non-funded income from customer transactions.
The lender's Net Funded Income (NFI) grew by 59.2 per cent to Sh14.8 billion from the service fee income stream that is anchored on enhanced digital capabilities.
This resulted in customers conducting 99 per cent of all transactions with ease and secured digital channels.
Customer loans were up by 32 per cent to Sh928.8 billion, from increased lending across the Group while customer deposits rose by 41.5 per cent to Sh 1.2 trillion, mainly from TMB and additional deposits from the existing businesses.
Shareholders’ funds grew by 17 per cent to Sh214.8 billion from the increase in accumulated profits for the year to date.
Operational costs increased by 46.1 per cent from the consolidation of TMB and expenditure to support additional revenues generated.
Provisions rose by 99 per cent, driven by increased credit risk and the impact of forex devaluation in Kenya, a prudent step on the backdrop of a challenging operating environment that has greatly impacted asset quality.
On asset quality, the ratio of non-performing loans (NPL) stood at 17.5 per cent, largely driven by downgrades from the KCB Kenya business.
"The Group is focused on recovery efforts and proactive management of the lending portfolio management to improve asset quality,'' Russo said.
Capital buffers were well above regulatory limits, with core capital as a proportion of total risk-weighted assets standing at 13.6 per cent against the statutory minimum of 10.5 per cent.
The total capital-to-risk-weighted assets ratio was at 17 per cent against a regulatory minimum of 14.5 per cent.
All banking subsidiaries were compliant with their respective regulatory capital requirements.