- East Africa’s banking giant KCB Group reports heightened operational expenses, which surged to $627 million in 2023, up from $447.9 million in 2022.
- The costs are associated with the consolidation of its subsidiary in the Democratic Republic of Congo, Trust Merchant Bank (TMB),
- Additional expenditures were related to a voluntary retirement scheme as well as litigation fees.
KCB Group, one of East Africa’s banking giants, has reported a net profit decline to $282 million for the year ending December 2023, from $307 million in 2022.
The bank has attributed this decline to increased operational costs and higher provisions for bad loans as primary reasons for the downturn in profitability.
In a period marked by economic challenges and strategic expansions, KCB Group faced heightened operational expenses, which surged to $627 million in 2023, up from $447.9 million in 2022.
DRC-based Trust Merchant Bank consolidation costs
This increase was largely due to the costs associated with the consolidation of its subsidiary in the Democratic Republic of Congo, Trust Merchant Bank (TMB), alongside expenditures related to a voluntary retirement scheme as well as litigation fees.
The bank also had to contend with a significant rise in provisions for bad loans, which soared by 154.7 per cent. This increase was attributed to downgraded loans within Kenya and the need for additional provisions against loans denominated in foreign currencies, exacerbated by the depreciating Kenya Shilling.
Unlike some of its peers in Kenya, KCB Group has chosen to conserve capital this year, foregoing dividend payouts in anticipation of a stronger performance in 2024.
This decision signals the bank’s focus on long-term sustainability over immediate shareholder returns, Chief Financial Officer, Lawrence Kimathi said.
Despite these setbacks, KCB Group’s CEO, Paul Russo, remains optimistic about the bank’s resilience and its ability to maintain positive growth across its core business areas.
“We had a fairly good run in the 12 months, achieving strong organic growth despite the difficult economic climate,” Russo remarked. He further noted that the bank is committed to supporting its customers through various financing options to help them overcome economic challenges and realize their business and investment goals.
“Focus remained on robust cost management to give us room to invest in initiatives to drive growth and put the Group on a strong pedestal for better growth in 2024, supported by strong capital and liquidity buffers.
“We remain committed to opening doors of opportunity for all our stakeholders in line with our brand purpose, For People For Better and at the same time running a business that is anchored on sustainable practices,” he added.
Read also: Loan defaults hit Kenya’s banking sector amid economic struggles
Growth in total assets to $16.4Bn
In 2023, the Group reported 40 per cent increase in total assets, reaching $16.4 billion, buoyed by a 48.9 percent surge in customer deposits to $12.8 billion.
This growth stems primarily from KCB Bank Kenya and includes contributions from the fully integrated TMB operations over the 12 month period. Customer loans also saw a significant uptick, growing by 28.7 per cent to reach $9 billion.
Under the leadership of Dr. Joseph Kinyua, KCB Group Chairman, the bank said it is strategically positioning its entities outside Kenya to support its Pan-African expansion strategy.
“TMB in DRC has come in strong, propelling us toward our ambition,” Dr. Kinyua stated, highlighting the Group’s readiness power Pan-African trade.
KCB Group 2024-2026 strategic plan
“Our international business has shown great resilience, and our regional performance was within target. Our focus into the future is to position the entities outside Kenya as anchor support channels for our Pan-African expansion agenda while delivering on our overall growth agenda,” added Dr. Kinyua.
Looking ahead, KCB Group has launched a new three-year strategic plan for 2024-2026, dubbed “Transforming Today Together.”
This initiative is set to navigate future challenges and opportunities, aiming to unlock value in innovative and socially responsible ways, reaffirming the Group’s commitment to its growth agenda and the economic empowerment of the communities it serves.
Over the years, KCB Group has grown and spread its wings from Kenya into Tanzania, South Sudan, Uganda, Rwanda, Burundi, and the Democratic Republic of Congo.
~ (1.000 USD = 132.6 KES)
