Kenya Commercial Bank has reported a pre-tax profit of Sh4.5 billion in its first quarter (Q1) of 2017 financial report driven mainly by the non-interest income, which increased by 20.3 per cent as compared to from the same period last year.
Profits slightly declined by 1.8 per cent compared to Sh4.6 billion it posted in a similar period on March 31, last year.
The decline was attributed to the tough economic environment, interest rate caps and hyper-inflation in South Sudan – all which took a toll on the group’s interest income despite recording a 14.3 per cent rise in net loans and advances to customers.
Joshua Oigara, KCB Group Chief executive and managing director, said the full effect of the law capping interest rates resulted in an interest income dip of 12 per cent during the quarter from Sh16 billion in Q1 2016 to Sh14.1 billion this year.
“We have witnessed an increasingly challenging operating environment across all markets. In Kenya, the interest rate caps have made it difficult to price for risk whereas some of our subsidiaries are experiencing high inflation and a shortage of foreign currency,” Oigara said.
According to the report, interest expense declined by 27 per cent from Sh5.2 billion to Sh3.8 billion occasioned by reduced cost of funds. The Group posted a significant improvement in Forex income which was up 72.1 per cent, total assets up by 8.8 per cent and shareholder funds up 20.6 per cent
Oigara said hyperinflation in South Sudan in 2016 resulted in a Sh3.4 billion loss on the net monetary position. He nevertheless said that the adverse impact of the interest capping law was cushioned by a 27 per cent reduction in interest expense, 20 per cent growth in non-interest income and prudent cost management limited cost growth to below inflation.
According to the results, the group’s non-interest income was up 20.3 per cent from Sh4.6 billion in the first quarter of 2016 compared to Sh5.6 billion reported in the same period this year, underscoring the growing importance of income derived from alternative revenue channels.
“KCB group’s non-interest income currently accounts for 35 per cent of the Group’s total operating income and is expected to be the growth driver going forward,” he said.
Oigara said KCB Group has pegged its future on its Fintech strategy that rides on a digital platform to provide seamless services for its customers.