KCB Group is targeting increased lending to the SMEs to boost earnings, it said yesterday after posting a modest 13.10 per cent jump in profit after tax for the six-month period ended June 30. The largest lender by asset value reported post tax profit increased to Sh9.24 billion from Sh8.17 billion in June 2014, and sees the dominant small and medium enterprises contributing most of its growth going forward.
Chief executive Joshua Oigara said the bank was setting aside Sh40.75 billion($400 million) in additional funds dedicated to investors in the sector. The 250-branch lender, he said after an investor briefing in Nairobi, inked a Sh15.28 billion($150 million) long term loan deal with World Bank’s private sector lending arm, the International Finance Corporation, in April.
Further negotiations were also ongoing with the IFC and European Investment Bank for additional Sh25.47 billion($250 million) with the cash expected before end of the year, Oigara added.
“Most of our transactions, 45 per cent to be exact, are now happening in small and medium-sized businesses,” he said, adding that customers in the SMEs are growing at 30 per cent on average. “I spent some of the time talking to them at the just ended Global Entrepreneurship Summit and there is a lot of potential for growth in this area.”
KCB announcement follows that of its fiercest rival, Equity Bank, that said on Tuesday it had signed loan deals amounting to Sh53.49 billion ($525 million) for onward lending to entrepreneurs and innovators in the sector following the two-day GES summit ended last Sunday.
The funds were raised from US’s Overseas Private Investment Corporation ($200 million or Sh20.38 billion), African Development Bank($150 million or Sh15.28 billion), International Finance Corporation($100 million or Sh10.19 billion) and European Investment Bank(($75 million or Sh7.64 billion). Equity, largest lender by deposit accounts, is yet to release its financial performance for the six months to June.
“We are not about to relinquish our position as the top bank in this region,” Oigara said, adding that KCB sees the increasing cost of funds due to rising interest rates as “an opportunity rather than a challenge”.
The bank’s loan portfolio increased by Sh76.59 billion in the six months to June to Sh320.60 billion compared to a year earlier, earning it 13.54 per cent more in interest to Sh19.45 billion.
Deposits reached Sh445.04 billion, a rise of Sh91.44 billion, while transaction fees and commissions helped grow non-funded income streams by 8.47 per cent to Sh11.27 billion.
A faster growth of 28.86 per cent or Sh126.90 billion in assets to Sh566.61 and a 2.5 per cent increase statutory capitalisation ratios effective last January however reduced the lender’s capital buffers over the regulatory requirements.
KCB’s total capital to total risk weighted assets closed June at 15.9 per cent, reduced from 20.7 per cent a year before, but still well above regulatory minimum threshold of 14.5 per cent.