KCB pays Sh3.2bn interim dividend – Business Daily
KCB chief executive Paul Russo. FILE PHOTO | NMG
KCB Group has declared an interim dividend of Sh1 per share or a total of Sh3.2 billion after reporting a 20.9 percent net profit growth in the nine months ended September.
The bank was among the institutions that skipped declaring interim payouts at the traditional half-year results announcements, a move that was partly linked to uncertainty ahead of the recent General Election.
“The directors have approved an interim dividend of Sh1 for every ordinary share held. The dividend will be paid on or about Friday, January 13, 2023 to shareholders on the register at the close of business on Thursday, December 8, 2022,” KCB said in a statement.
The bank’s net income rose to Sh30.4 billion in the nine-month period under review compared to Sh25.1 billion the year before.
Higher income from lending and transactions were the key drivers of the earnings growth.
Total interest income increased 13.6 percent to Sh83.5 billion on account of expansion of lending and purchase of government debt securities besides rising rates on these assets.
“Additionally, interest income grew mainly from an increase in our earning assets portfolio, in particular loans disbursed during the period and investment in government securities,” KCB said. The bank’s loan book increased 16.4 percent to Sh758.8 billion while investment in treasuries rose 25.2 percent to Sh144.8 billion.
The rates on T-bills and bonds have been rising in recent months and so has the interest on loans.
The Central Bank of Kenya (CBK) has raised its benchmark rates besides approving most commercial banks’ risk-based lending plans, allowing them to gradually raise rates.
Non-interest income made a significant contribution to the bottom-line, surging 30.1 percent to Sh30.5 billion. KCB said it benefited from higher foreign exchange earnings and lending fees.
KCB’s operating expenses grew 10.7 percent to Sh48.8 billion, which the company attributed to several factors including its acquisition of a bank in Rwanda.
“This was on account of the impact of BPR Bank, increased business activities and increase in staff costs. The group has put in place cost saving initiatives targeting savings across all its businesses,” the bank said.
KCB reduced its loan loss provision by Sh2 billion to Sh7.2 billion despite a sharp expansion in gross defaults.
The bank’s gross non-performing loans surged 52.1 percent to Sh149.2 billion. The gross non-performing loans, however, dropped from a high of Sh173.4 billion in the quarter ended June.
KCB is currently in the process of acquiring a controlling 85 percent of the Democratic Republic of Congo’s (DRC’s) Trust Merchant Bank (TMB) for an estimated Sh17 billion as part of its regional expansion.
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The target bank draws most of its revenue from fees and commissions, with interest income coming second.
The DRC’s economy is highly dollarised —meaning that the greenback is being used widely alongside the Congolese Franc— which generates a lot of foreign exchange transactions, resulting in commissions that outpace interest income from lending.
KCB, however, said it expects to diversify TMB’s income streams by accessing a wider customer base, leveraging its regional best lending practices, and accessing higher-yielding securities in the East African Community (EAC), which the DRC formally joined in April this year.
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KCB said the minority investors in TMB will continue to hold the remaining stake of 15 percent for a period of not less than two years after which the Kenyan banking multinational will have the right to acquire their shares.
The earnings of Kenyan banks have continued to grow, helped by economic recovery and reduction in loan loss provisions which were pronounced in the initial impact of Covid-19.
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