KCB Group has reported a 40 percent drop in net profit for the six months to June 30, 2020, over increased provisioning to deal with bad loans linked to the Covid-19 pandemic.
This comes after the lender posted Sh7.6 billion in after-tax profits for the first six months of 2020, marking a 40 percent decline from the Sh12.7 billion reported last year.
The bank, which has operations in Kenya, Uganda, Tanzania, Rwanda, Burundi, and South Sudan, recorded a net profit of Ksh7.57 billion ($75.7 million) compared to Ksh12.72 billion ($127.2 million) in the same period last year.
According to its unaudited financial statements released on Wednesday, KCB set aside Ksh11 billion ($110 million) in provision for potential loan losses that could crystalize as a result of the pandemic impact, compared to Ksh3 billion ($30 million) during the same period last year.
KCB boss Joshua Oigara said the March to June period has been the most difficult quarter for nearly ten years at the bank, describing the provisions the lender has been forced to make as ‘catastrophic’.
During the six months’ period, the ratio of non-performing loans (NPLs) to total loan book increased to 13.7 percent from 7.8 percent, mainly due to consolidation of its subsidiary National Bank of Kenya (NBK) and heightened defaults associated with the pandemic.
“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 Chief Executive Officer Joshua Oigara.
“When the virus hit home in March, we made a commitment to look after our customers, staff, and other stakeholders while pursuing business continuity. We intend to keep on this promise even under the current worsening operating environment.”
KCB’s total operating income, however, increased 17 percent to Ksh45 billion ($450 million) from Ksh38.6 billion ($386 million) in June 2019, while the net interest income grew 22 percent to Ksh31.1 billion ($311 million) from Ksh25.4 billion ($254 million), mainly due to additional investments in Government securities and lending.
Non-funded income increased six percent to Ksh14 billion ($140 million) from Ksh13.2 billion ($132 million), driven largely by revenues from the digital proposition, growth in the forex income, and additional income from NBK.
In the first quarter to March 31, KCB recorded eight percent growth in net profit to Ksh6.26 billion ($62.6 million) from Ksh5.77 billion ($57.7 million) in the same period last year.
In response to the pandemic, KCB Group has instituted a raft of interventions to cushion and support key stakeholders such as customers and employees.