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eMarkets Kenya

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As the period for reporting for the financial institutions sets in, the news so far has not been too sweet to the ears of most investors.

Today morning, the CEO of KCB Group, Mr. Joshua Oigara announced a rather mixed performance for the company as at the end of 2015. The group recorded Kes. 26.5 billion operating profits before tax and exceptional items, representing a commendable 11.6 % growth for year 2015 compared to 2014 results. The Profit after Tax stood at Kes. 19.6 billion a 16.4% jump from previous performance of Kes. 16.8 billion.

However, the Comprehensive income for the group was suppressed by loss in value reported on Forex operations, which accounted for Kes. 6.1 billion loss compared to a gain of 904 million in 2014, a seven fold deterioration. As a result the group's comprehensive income settled at Kes. 11.7 billion, 33% less than previous year's profit of Kes. 17.6 billion.

According to the group's analysis, Kenya continued to contribute over 75% of the group's revenue and profits, though on a declining path compared year-on-year.

To most entrepreneurs and investors, 2015 was a difficult year marked with foreign exchange volatility, declining demand and slowing economic activity. Such was evidenced by the country's failure to meet its earlier GDP growth to settle at 5.6%. Thus KCB's performance is yet another confirmation of the environment businesses were subjected into in 2015.

The intervention by Central Bank on Kenya Shilling value loss in the exchange market did not make things any better for companies operating across the border. The monetary policy tightening resulted into higher inter-bank lending rates and subsequently pushed the banks lending rates to customers higher. As a result, the banks' non-performing loans soared up by as much as 27.5% if KCB's numbers is anything to go by.

The group's performance was also impacted negatively by increased expense on customer deposits, which again shows the impact of the tight monetary policy effect. According to the bank's reports, interest expense on customer deposits stood at 15.3 billion an increase of 43.8% to that of 2014.

The records display a higher increase in expenses compared to the gains realised on the bank's main income stream - Interest on loans and advances to customers. Though the group increased its loans to customers to 345 billion from 283 billion in 2014, the gain from the loans was only 46 billion, a 26 % increase from 36.5 billion income received in 2014.

The group has recommended a dividend of Kes. 2.00 per share for the year 2015, maintaining a flat payment year-on-year for a third year in a row. However, the group announced that half of the dividend will be cash payment and half in the form of shares (scrip dividend).

Shareholders' equity recorded a modest appreciation, increasing by 5.6 billion from 75.6 billion in 2014. This was mostly contributed by the ploughing back of the year's profits accounting for 3.7 billion increase in the shareholders' funds.

 

Last modified on Wednesday, 02 March 2016

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