Performance
KCB group reported a profit of 15 billion Kenya shillings for the year 2013 marking a 17% increase in profit before tax. The bank has maintained its position as the most profitable bank in the region.
Its loan book grew to KES 227.7 billion up from KES 211.6 billion, an 8%increase. The interest income generated was KES 41.6 billion compared to KES 43 billion reported in the previous year while the operating expenses rose to 50 billion in the year up from 46 billion in the previous year. Increasing profitability signify good growth. However, the reduction in interest income is a point of concern for a bank with risks spread across the region.
Risk Profile
KCB is a group whose risks are well spread across the region and well beyond its core business making it stable. The company has survived the bad debts of the past, the political upheavals in the region and unpopular management decision of restructuring to come out stronger and better.
Political risk remains a key challenge due to the conflicts in South Sudan and the constant terror attacks in Kenya.
With a Long term credit rating of AA and Short term one of A1+, the bank’s risk profile is still a worthy investment vehicle.
Market outlook
The bank’s strategy of targeting customers at the bottom of the pyramid seemed to be paying off. Small business is big business in Kenya.
The management expects growth to come from technology products; a challenging strategy given the cutthroat terrain of technology based financial services. In this regard the bank launched internet banking and m-benki products in the year under analysis. However, the technology financial services is the forte of Safaricom which they are fighting to keep while the market leader Equity Bank has also indicated a keen interest to join the fray.
All in all, the Kenyan market is under-banked and new strategies to reach the untapped market by a large player like KCB are bound to pay off.
Growth spectrum
KCB leadership see the new growth areas i in insurance and KCB Capital. This essentially means while the bank is eyeing the bottom of the pyramid, they have not lost sight of their corporate financing strength and wish to reinforce it through KCB Capital.
However, the real growth opportunity lies in their mortgage segment for lower end housing. The bank, like any other in the sector has shied away from expanding this function due to the large amount of capital required; yet it remains the gem in the crown.
