This archive report was first published on 18 August 2020.
KCB Grapples with Covid-19 Impact on Profitability ¶
As the country's biggest bank by assets, KCB Group has seen its net earnings drop by a staggering 40.4 percent in the half year ended June, a clear indication of the impact of coronavirus-related defaults and loan restructuring on the banking industry.
According to the bank's half-year results, KCB made a net profit of Sh7.5 billion in the review period compared to Sh12.7 billion the year before. The performance was attributed to increased provisioning for bad debt.
Speaking with Nyakundi Report, KCB Group CEO Joshua Oigara acknowledged that the performance was better than expected, given the unprecedented nature of the pandemic. 'In our forecast, we had expected 33 percent 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.'
However, Oigara noted that the bank's numbers went down by 40 percent, which was lower than the expected 75 percent impact. He attributed this to the bank's efforts to support its customers during the pandemic.
On the performance of international subsidiaries, Oigara noted that they had done quite well, with overall performance up by 22 percent compared with last year. However, he noted that the bank had opted to be conservative in Tanzania, resulting in a 30 percent decline in profitability due to increased provisions.
Looking ahead, Oigara remains optimistic about the bank's performance in the second half of the year, citing a 17 percent growth in income, loans and advances, and customer deposits. He also noted that the bank had restructured Ksh101 billion (923.2 million) loans, which is nearly all the loans they intend to restructure.
Regarding the increase in non-performing loans (NPLs), Oigara acknowledged that it was a fact that customers were not able to repay their loans due to disruptions and the shutdown of economies. However, he noted that the bank was happy to see the reopening of many sectors of the economy and expected that as customers came back, provisions would definitely go down.
