Report From The Group Chief Finance Officer

Overview of Operating Environment

The Group delivered a strong bottom-line performance on the back of operational efficiency supported by implementation of IFRS 9 (day one adjustments). However, top-line growth was subdued, an indication of the tough business environment we operated in across all our markets. As anticipated, the hangover of 2017’s double election in Kenya hit businesses in the first half of 2018 with tight liquidity that pushed up both cost of funds and non-performing loans.
The law capping interest rates further exacerbated subdued growth by limiting our ability to pass on cost increases and risk. It was a mixed bag for our international businesses with sustained reduction in risk free interest rates in both Tanzania and Uganda, stable inflation and GDP growth in all markets except Burundi and South Sudan.

Business performance

Our Kenya business continued to deliver strong growth; total assets were up 12% mostly driven by loans and advances which posted an 8% growth. Customer deposits also performed well with an 8% increase over 2017. Profit after tax closed at KShs.22.4 billion reflecting a growth of 17% primarily due to a 7% reduction in costs. Benefits
from our restructuring investment done in 2017 coupled with focused cost management have delivered savings that fueled profit growth. Collectively, international businesses profit before tax (PBT) grew by 64% increasing their contribution to overall Group profits to 7.3% (up from 5.6% in 2017).
KCB Bank Tanzania, Uganda and Burundi had stellar performances in 2018. The fundamentals are in place for all the businesses and we expect them to continue on this growth trajectory.

The Group’s total assets grew to KShs. 714.3 billion from KShs. 646.7 billion, driven by growth in the traditional loan book and mobile loans, which grew by 8% to close at KShs. 455.9 billion. Customer deposits were up KShs. 38 billion to KShs.537.5 billion. Net interest income grew to KShs. 48.8 billion while non-interest income remained stable at KShs. 23 billion. Operating expenses went down to KShs. 35 billion from KShs.36.4 billion following improved efficiencies across the entire business.

Our continued efforts to improve asset quality bore fruits with an improvement in non-performing loans of KShs. 4.8 billion. These results pushed up the Group’s after tax profit by 22% to KShs. 24.0 billion compared to the previous year’s KShs.19.7 billion. The Group’s capital position closed strongly at 18.1% for core capital and 19.5% for total capital against regulatory targets of 10.5% and 14.5% respectively.

Return on average equity was 22.0%, an improvement over the previous year’s performance while dividend per share improved substantially by 17% to KShs. 3.50 per share.



We are cautiously optimistic that the operating environment will improve across the markets we do business in. Impact of the prolonged dry spell in Kenya on GDP and inflation is a concern as is the fragile, ongoing peace talks in South Sudan. Internally we see cyber-security remaining a big challenge for us and for the industry and will therefore continue to be an area we focus our investment. We expect to continue delivering good profit growth in 2019 anchored on our balance sheet strength and recently launched digital platform.

Lawrence Kimathi
Group Chief Finance Officer