Kenya Commercial Bank Ltd., the country’s biggest lender by assets, is seeking to strengthen its position in three countries in the region to expand its international presence, Chief Executive Officer Joshua Oigara said.
The bank, based in Nairobi, is focused on growing its presence in Tanzania, Rwanda and Burundi, Oigara said in an interview Thursday in the capital. The bank has also been granted regulatory approval to operate a representative office in neighboring Ethiopia, he said.
KCB, as it’s known, posted a 9.6 percent increase in profit in the nine months through September to 13.7 billion shillings ($135 million) as income from loans grew by a similar margin to
28.4 billion shillings. Earnings at the bank’s international businesses in Uganda, Rwanda, Tanzania, Burundi and South Sudan grew 74 percent in the period, contributing 12 percent to total profit, it said in a statement.
The bank is on track to achieve a 15 percent increase in full-year earnings, Oigara said.
“We see stronger growth in all markets, except for Uganda, which has had a slowdown” because of a challenging macro-economic environment, he said. “We would like to strengthen our capacity in Tanzania and Rwanda. You don’t strengthen by building branches.”R
KCB shares rose as much as 1.2 percent after the earnings and traded 0.6 percent higher at 40.75 shillings by 11:34 a.m. in Nairobi. The stock has dropped 28 percent so far this year, underperforming a 15 percent decline in the Nairobi Securities Exchange All Share Index.
Oigara said KCB’s stock is undervalued by 25 percent.
“We are growing our assets by 30 percent every year,” he said. “We know the market is a bit nervous, but at this level, this is the best time to buy the stock.”
Banking shares fell sharply earlier this month after the central bank placed Imperial Bank Ltd., a closely held lender, under administration. It was the second Kenyan lender to be placed under statutory management in as many months.
Kenyan banks also face reduced lending margins as their funding costs rise and an increase in interest rates charged to customers curtails appetite for fresh loans. Lenders have increased the rates they ask for commercial loans to as high as 27 percent after borrowing by the government in domestic markets to shore up the budget pushed yields on short-term debt to more than 22 percent.
“Banks have responded to central bank monetary policy tightening by raising interest rates,” Oigara said. “We haven’t seen a big impact yet. If you have higher rates for a long time you probably will see high levels of non-performing loans.”