KCB Group PLC posted a 40 percent drop in first-half pre-tax profit attributed to the effects of coronavirus pandemic and its impact on its loan-loss provisions.

Its after-tax profit dropped to Ksh 7.6 billion while pretax profit declined to  28 percent to Ksh 12.82 billion.

“The second quarter was the toughest in our recent history as the pandemic hurt economic activity across markets,” Chief Executive Joshua Oigara said in a statement.

“We project a continued strain on the business and economy in the remaining part of the year as the COVID-19 pandemic evolves. We will accelerate our support to customers, roll out cost management initiatives and seek avenues to boost efficiency though digitization to cushion the business from emerging pressures,” added Mr Oigara.

Total operating income increased by 16.6 percent to Ksh.45 billion from Ksh.38.6 billion.

Net interest income rose to Ksh.31.1 billion from Ksh.25.4 billion while non-interest funded income improved to Ksh.13.9 billion from Ksh.13.2 billion.

The bank’s balance sheet further expanded as total loans to customers and customer deposits increased to Ksh.559.9 billion and Ksh.758.2 billion respectively.

On the other hand, its operating expenses rose by 55.6 percent to Ksh.32.2 billion from Ksh.20.7 billion last year. This saw its subsidiary-the National Bank of Kenya (NBK) slide back into a loss of Ksh.381.3 million from a profit of Ksh.107.8 million last year.

Consequently, KCB will not pay an interim dividend to its shareholders this year.

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According to Sterling Capital’s HY 2020 Kenya Banks Earnings Update for KCB Group, “They expect the stock price to remain subdued due to reduced profitability and lack of an interim dividend.”

Performance FY2020 will be significantly impacted by the pandemic that has seen economic performance dwindle across all the operating markets reducing customers’ ability to service their loans and reducing the demand for credit. “We expect the group to continue investing in government securities to reduce potential losses brought about by lending to the retail sector.” 

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Community Engagement Editor, connecting audiences with news and promoting diverse voices. He also consults for East African brands on digital strategy.

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