Kenya Commercial Bank (KCB) Group has disclosed a 22.2 per cent profit decline for the year ending in December 2020 to Ksh19.6 billion from Ksh25.2 billion in 2019.
The reduced profit is highly contributed by a higher cover for loan defaults with the provision costs rising to Ksh27.5 billion from Ksh8.9 billion previously.
However, KCB Group Managing Director Joshua Oigara expects a turnaround in customer abilities to repay back loans to nullify the heightened credit risks to banks as seen across their performance in 2020.
“The pandemic significantly affected our business across the markets we operate in, with most of them going into some degree of lockdown. The negative impact on the economy drastically reduced our customers’ ability to operate necessitating loan restructures. Signs of recovery were evident at the tail end of the year with increased business activity, and we believe this momentum will carry into 2021,” he said.
The Central Bank of Kenya (CBK) had told banks that they will only pay dividends after ensuring that they have enough capital to ride out the economic fallout from the pandemic.
According to KCB, it has strengthened their balance sheet to give room to support their customers and stakeholders through the crisis while ring-fencing the business for future growth despite the challenges.
The bank was forced to make increased provisions as borrower risks surged with its own stock of non-performing loans swelling to Ksh.96.6 billion from a lower Ksh.63.4 billion a year earlier.
While the higher loan loss cover raised overall expenses, the bank defied the tough operating environment to grow both its interest and non-interest funded (NFI) income streams.
Interest income took off to Ksh88.7 billion from Ksh74.4 billion while NFI grew marginally to Ksh28.5 billion from Ksh.28.2 billion.
However, KCB has held off the concerns to declare an unlikely Ksh1 final dividend to shareholders even as its earnings per share declined to Ksh6.10 from Ksh8.11 a year before.
KCB’s asset base includes Ksh595.3 billion in net loans and advances to customers and Ksh767.2 billion in customer deposits, helping to raise its total asset base to Sh987.8 billion and closer to its short-term target of Sh1 trillion.