The KCB Group’s 2010 trading performance continued to gather momentum as the bank announced a 16% increase in pretax profit for its first half of the year to KSh4.2 billion. After tax profit increased by 19% to KSh2.9 billion up from KSh2.4 billion the same period last year.

KCB Group Chairman, Mr. Peter W. Muthoka, told media and investors that the bank’s first half pretax profit increased from KSh3.6 billion during the same period in 2009 to reach the new level owing to improved efficiencies, cost management initiatives and enhanced product marketing.

“We are delighted to note that our business’ performance is picking up at the right time hence giving us optimism that we shall achieve our 2010   targets,” he said.

Mr. Muthoka attributed the performance to a 24% growth in net interest income from KSh7.1 billion in  the first half of 2009 to KSh8.8 billion and a 16% increase  in fees and commissions from the KSh2.6 billion level  in the second quarter of last year to KSh3 billion.

Commenting on the performance, KCB Group Chief Executive, Dr. Martin Oduor-Otieno, said the increased momentum reflected the recovery of Kenya’s economy hit hard last year by global recession and a confidence crisis in the world’s financial sector.

“We are seeing a resurgence in economic activities in the country as businesses recover from what was a tough year in 2009,” said Oduor-Otieno.

The bank’s total operating income grew by 15% from KSh11.4 billion during the same period in 2009 to KSh13.2 billion in June, 2010 against a 20% increase in total operating expenses to KSh8.6 billion up from   KSh7.2 billion the previous period.

“In spite of the increase in costs, we are seeing some stability in our operating expenses.  The current rise in costs is as a result of ongoing marketing activities and continued investment in our information technology platform,” added the Chief Executive.

The bank’s assets went up by 27% to stand at KSh226.1 billion at the end of the second quarter of 2010 from KSh177.8 billion during the same period in 2009.  Net loans and advances topped KSh130 billion up from KSh103.7 billion, a 25% growth during the period under review.  Deposits increased by 50% from KSh127.6 billion in June 2009 to KSh192 billion this year. 

“We continue to lead the market in terms of assets due to the significant increase in deposits and loans as a result of extensive marketing initiatives and utilization of our wide branch network,” said Oduor-Otieno.

Current accounts formed a significant portion of the bank’s deposits at KSh108.7 billion with transaction account balances (KSh36 billion) and call deposits (KSh42 billion) complementing the largest deposit base of any bank in the East African region. 

“We have been aggressively seeking affordable deposits from the market using  such products and services as Bankika and Jiinue propositions  in order to fund our assets and reduce the cost of funds to our business,” said the Chief Executive.

Shareholder funds were enhanced by 11% to move to KSh23.4 billion in June this year from KSh21.1 billion over the same period in 2009.

The bank’s prudential ratios remained  above Central Bank of Kenya’s minimum levels with core capital to total deposits liabilities at 10.6% (CBK minimum -- 8.0%), core capital to total risk weighted assets at 13.1% (CBK minimum – 8.0%), total capital to total risk weighted assets at 13.2% (CBK minimum – 12.0%) and   liquidity   at 36.3% (CBK minimum – 20.0%)

“Our Capital ratios have dropped considerably since December 2009 due to our ongoing growth   but we expect that pressure to ease up once we receive the proceeds of the ongoing KCB rights issue,” added Oduor-Otieno. 
Chairman,  Mr.  Peter W. Muthoka, said the Board was confident the bank will achieve its profitability targets for 2010 with the momentum expected to peak in the third quarter of the year.

“Our cost management efforts are expected to bear fruit in the short to medium terms thus significantly boosting our bottom-line in line with our consolidation agenda,” said the Chairman.
Mr. Muthoka urged shareholders to support the bank’s ongoing rights issue in order to lay a firm foundation for future growth and profitability.  

“The KCB Rights Issue provides a strong platform for the bank to grow its assets and yield better returns to shareholders.  I urge all shareholders to take up their rights in order to give our business the growth impetus it requires to become more profitable into the future,” added the Chairman.
Oduor-Otieno said the bank had completed the rollout of its new IT system, T24, to all businesses across the region setting the scene for a unique one-branch banking platform.

“We just finished installing the system in KCB Tanzania, which was the last in   line and our focus now shifts to reaping the benefits of this state-of-the-art technology,” said the Chief Executive.
The bank expects to utilize its new system to launch modern technology- driven products and services, modernize its processes and enhance operational efficiency.

Mr. Muthoka was full of praise for KCB Staff for their hard-work and dedication that contributed to the good performance.
“I would also like to thank our customers, the media and my fellow board members for their support in placing this bank on the path to greatness in the years ahead,” he concluded.