Kenya Commercial Bank First-Half Profit Rises as Loans GrowEric Ombok
Kenya Commercial Bank Ltd., the East African nation’s biggest lender by market value, said first-half profit jumped 18 percent as earnings from loans grew.
Net income climbed to 7.19 billion shillings ($82 million) in the six months through June from 6.09 billion shillings a year earlier, Chief Executive Officer Joshua Oigara told reporters today in the capital, Nairobi. Net interest income, the money banks earn from interest charges on loans, climbed 13 percent to 16.1 billion shillings, he said.
“The growth in profits were driven by higher income and improving cost management despite restructuring costs,” Nairobi-based Kestrel Capital (East Africa) Ltd. said in an e-mailed note to clients. The bank paid 750 million shillings to employees who took early retirement, Oigara said.
Kenya’s central bank cut its benchmark interest rate by 2.5 percentage points in the first half to 8.5 percent, while commercial lenders reduced their average lending rates to about 17.9 percent from 18.7 percent over the same period, according to data compiled by Bloomberg.
Kenyan banks’ gross loans and advances increased 12 percent to 1.44 trillion shillings in May 2013 from a year earlier, according to data from the central bank. The additional lending was channeled to households, trade, manufacturing, and real estate, it said.
KCB, as the lender is known, expects its earnings growth rate to be sustained in the second half as more loans are issued, Oigara said. The bank plans to reduce its cost-to-income ratio to 50 percent by December from 54.6 percent in June, Oigara said.
Equity Bank Ltd., Kenya’s second-largest lender by market value, said last month profit during the period climbed 17 percent, while rivals Barclays Bank of Kenya Ltd. and Standard Chartered Bank of Kenya Ltd., reported declines of 13 percent and 0.4 percent respectively.
KCB shares rallied 43 percent this year on the Nairobi Securities Exchange, outperforming the FTSE-NSE 25 index, which has gained 23 percent. The stock fell 1.2 percent to 42.5 shillings by 1:21 p.m. in Nairobi.