KCB's National Bank bet drives up profitability

KCB Group’s acquisition of the National Bank of Kenya late last year has largely boosted the lender’s 2019 financial results, contrary to earlier predictions.

An analysis by Moody’s Investor Service released last June predicted the takeover would lead to a weaker financial position for KCB Group in the short term.

According to the report, KCB’s position was likely to improve over the next two to three years.

“KCB Group’s profitability and funding profiles would strengthen over the following two to three years, outweighing the short term effects,” Moody’s Investor Services said then.

The bank, however, yesterday announced a five per cent profit after tax to Sh25.2 billion, delivering improved profitability and higher returns to shareholders.

KCB Group's full-year net profit for 2018 stood at Sh24 billion.

“From a business perspective, the highlight of 2019 was the successful takeover of National Bank,” KCB Group chairman Andrew Kairu said during the announcement.

The lender’s loan book grew 17 per cent to Sh535.4 billion over the review period attributed to a strong lending pipeline primarily driven by both its retail and corporate banking customer segments.

The acquisition of NBK finalised late last year also drove up customer deposits, expanding 28 per cent to Sh686.6 billion.

KCB Group has grown its mobile loan book more than threefold as a majority of the bank's customers opt for mobile banking solutions.

Announcing its 2019 financial results the lender said mobile loans advanced to customers jumped to Sh212 billion compared to Sh54 billion the previous year.

Over the past five years, the bank has disbursed Sh319 billion worth of mobile loans meaning last year alone accounted for 66.46 per cent of these loans.

“Our investments in diversified channels are giving our customers a means to access banking services conveniently, at competitive prices and in line with our purpose of simplifying their world to enable their progress,” KCB Group chief executive Joshua Oigara said yesterday.

As at December 31, 97 per cent of all the bank's transactions were being performed outside the brick and mortar branches.

This, according to Oigara, has seen KCB's non-funded income grow 22.6 per cent to Sh28.2 billion compared to the same period in 2018.

“All business lines were strong in 2019 on both funded and non-funded income as cost control, operational efficiency and driving excellent customer experience remained a top priority,” Oigara said.

During the review period, net interest income grew 15 per cent to Sh56.1 billion largely driven by a 17 per cent growth in the bank’s loan book, digital lending and additional interest income from the National Bank of Kenya.

The bank distributed part of the profit by way of an interim dividend of Sh1.0 per share in the course of 2019.

The Board has proposed a final dividend of Sh2.5 per share to be presented to shareholders in the AGM to be held in May 2020.