KCB Group, Kenya’s largest bank, posted a 49% increase in net profit for the first nine months of 2024, driven by robust revenue growth and expanding regional operations. The bank’s profits reached KES 45.8 billion ($354 million), up from KES 30.7 billion ($238 million) in the same period in 2023.
Key Financial Highlights
- Revenue Growth:
Total revenue rose by 22% to KES 142.9 billion ($1.1 billion), supported by income from both lending and non-lending activities such as foreign exchange income and transaction fees. - Asset Expansion:
Total assets grew to KES 2.0 trillion ($15.4 billion), bolstered by a 36.6% contribution from subsidiaries outside Kenya. Customer deposits accounted for KES 1.5 trillion ($11.5 billion), while net loans and advances increased to KES 1.1 trillion ($8.5 billion), reflecting a sharp rise in retail sector lending. - Regional Diversification:
Subsidiaries outside Kenya contributed 36.6% of KCB Group’s profits and 34% of total assets, showcasing the impact of the bank’s geographic expansion. The acquisition of Trust Merchant Bank in the Democratic Republic of Congo in December 2022 highlighted this strategy, though it exposes the group to varying economic and political risks.
Challenges: Non-Performing Loans (NPLs)
Despite strong performance, the bank reported a rise in bad loans, with non-performing loans (NPLs) growing to KES 215.3 billion ($1.67 billion). Provisions for these NPLs increased by 12.2%. Real estate and manufacturing sectors remain key contributors to the bank’s credit risks, creating challenges in managing these bad loans.
Shareholder Returns and Capital Strength
- Return on Equity (RoE): Improved from 19.6% to 25.6%, reflecting better shareholder returns.
- Shareholders’ Funds: Increased to KES 249 billion ($1.9 billion).
- Capital Adequacy: The group’s capital remains well above regulatory requirements, except for the National Bank of Kenya (NBK), a subsidiary facing compliance issues.
Access Bank’s Acquisition of NBK
In October 2024, Access Bank received approval from the Competition Authority of Kenya (CAK) to acquire NBK in a deal valued at approximately $100 million. This transaction could address NBK’s capital challenges and support its turnaround.
Outlook
KCB Group’s strong revenue growth, customer confidence, and successful regional expansion underline its resilience amid challenging economic conditions. However, rising NPLs and exposure to volatile regional markets highlight the need for strategic risk management to sustain profitability and shareholder value.