KCB Group has announced a 40.2 percent dip in profits through the first half of 2020 to Ksh.7.6 billion from Ksh.12.7 billion last year.
The significant decline in earnings is attributable to higher provisioning for future credit losses through the IFRS-19 accounting standards driven by volatility arising from the COVID-19 pandemic.
The bank set aside a further Ksh.8 billion for expected credit losses in the period lifting loan-loss provisioning by 367 percent from Ksh.3 billion last year.
Surprisingly, the lender’s top line performance was solid as total operating income increased by 16.6 percent to Ksh.45 billion from Ksh.38.6 billion.
Net interest income earned in the period rose to Ksh.31.1 billion from Ksh.25.4 billion while non-interest funded income improved to Ksh.13.9 billion from Ksh.13.2 billion.
The bank’s balance sheet further expanded as total loans to customers and customer deposits increased to Ksh.559.9 billion and Ksh.758.2 billion respectively.
Higher provisions for future credit losses however proved the difference as other operating expenses soared by 55.6 percent to Ksh.32.2 billion from Ksh.20.7 billion last year.
The provisions saw its subsidiary-the National Bank of Kenya (NBK) slide back into a loss of Ksh.381.3 million from a profit of Ksh.107.8 million last year.
Loan defaults have further haunted KCB Group with its stock gross non-performing loans (NPLS) expanding by 214.6 percent to Ksh.83.9 billion from Ksh.39.1 billion with the asset deterioration being witnessed in KCB’s own books.
“The second quarter was the toughest in our recent history as the pandemic hurt economic activity across markets. Most of the key sectors were nearly shut down and our customers continue to face unprecedented challenges,” said KCB Group CEO Joshua Oigara.
The weighty loan defaults was in spite of the bank extending the repayment of loans worth Ksh.101 billion in a means to cushion borrowers from the pandemic.
Subsequently, KCB will not pay an interim dividend to its shareholders this year as a precaution.
“We project a continued strain on the business and economy in the remaining part of the year as the COVID-19 pandemic evolves. We will accelerate our support to customers, roll out cost management initiatives and seek avenues to boost efficiency though digitization to cushion the business from emerging pressures,” added Mr Oigara.
KCB earning per share (EPS) have been trimmed to Ksh.4.72 in the period from Ksh.8.30 last year.