KCB Group reported a KSh. 7.6 billion profit after tax for the first half of 2020, a decline of 40% from Ksh. 12.7 billion after tax profit reported in the first half of 2019. This was on account of increased provisioning due to the Covid-19 Pandemic.

PERFORMANCE METRIC2Q 2020 (in KSh. Billions)2Q 2019 (in Ksh. Billions)CHANGE
Net Interest Income31.1025.40 22%
Total Non-Funded Income13.90 13.20 5%
Operating Income45.00 38.60 17%
Operating Expenses21.20 17.60 20%
Provision for Bad Debts11.00 3.00 267%
PBT12.80 17.90 28%
PAT7.60 12.70 40%
Loans and Advances559.90 478.70 17%
Government Securities208.50 135.50 54%
Total Assets953.10 746.50 28%
Borrowed Funds21.40 22.40 -5%
Customer Deposits758.20 563.20 35%
Total Equity132.10 117.50 12%
Return on Average Equity11.60% 23.50% 51%
Cost to Income47.00% 45.70% 3%
Gross NPL to Gross Loans13.70% 7.80% 76%
Non Funded Income Ratio31.00% 34.10% -9%
Cost of Funds2.70% 2.80% -4%
Net Interest Margin7.80% 8.30% -6%
Loan to Deposit Ratio80.70% 89.20% -10%

Operating Income and Operating Expenses

Operating Income increased by 17% from KSh. 38.60 billion in June 2019 to KS. 45 billion in June 2020.

Net Interest Income surged 22% to KSh. 31.1 billion from Ksh. 25.4 billion driven by increased investment in government securities.

Non Funded Income was up 5% to KSh. 13.9 billion in June 2020 from Ksh. 13.4 billion in June 2019. The drivers for this were growing digitisation of operations, growth in forex income as well as additional income from the newest KCB Group subsidiary, National Bank of Kenya.

Transactions outside the branch rose from 95% in June 2019 to 98% in June 2020, driven by agency banking, internet banking and mobile banking.

Operating expenses surged 20% to Ksh. 21.20 billion from Ksh. 17.60 billion in June 2019 due to National Bank of Kenya acquisition. KCB Group expects synergies realised from the acquisition plus group-wide cost management initiatives to improve this scenario in the remaining half of the year.

Cost to Income ratio increased from 45.7% to 47% since operating expense growth increase outpaced the growth in operating income.

KCB Group increased provision for bad debts from KSh. 3 billion in June 2019 to Ksh. 11 billion in June 2020. This was done to create reserves that will mostly cater for expected bad loans that might arise due to the Covid-19 pandemic effects.

There was marked deterioration in the efficiency of the Group as indicated by the 50% decline in Return on Average Equity to 11.6% in June 2020.

Balance Sheet Growth

Total assets of the group grew 28% from Ksh. 746.5 billion in June 2019 to Ksh. 953.1 billion in June 2020. The key driver for this growth is a 54% surge in investment in government securities from Ksh. 135.50 billion in the first half of 2019 to Ksh. 208.50 billion in the first half of 2020.

Net loans and advances increased 17% to close at Ksh. 559.9 billion for the period.

Customer deposits grew by 35% to Ksh. 758.2 billion in June 2020.

Low cost CASA deposits formed 81% of KCB Group deposit mix in HY2020 as compared to 77% in HY2019.

Asset Quality

The Gross NPLs to Gross Loans ratio grew 76% to 13.7% from 7.8% in June 2019.

This was mainly attributable to non-performing loans associated with NBK acquisition and rise in non-performing loans due to Covid 19 pandemic effects.

The stock of non-performing loans grew from Ksh. 39.1 billion in June 2019 to Ksh. 83.9 billion in June 2020.

Shareholders Funds

Total equity increased by 12% in the 12-month period ended June 2020 to Ksh. 132.10 billion.

The key driver for this is the growth in retained earnings.

Capital Position

The Group maintained healthy buffers on its capital ratios over the minimum regulatory requirement. Core capital to risk weighted assets stood at 17.9% against the Central Bank of Kenya statutory minimum of 10.5%. Total capital to risk weighted assets stood at 19.5% against the CBK statutory minimum of 14.5%.

All the subsidiaries of KCB Group complied with the statutory ratios save for NBK which the Group plans to pump more capital to help it comply with the statutory ratios and help it in the turnaround strategies to improve its performance.


KCB Group book value per share stood at Ksh. 41.21 as at 30 June 2020.

For the remaining part of the year till 3Q2020 results are out, this remains our modest valuation of the company.