KCB Group posts 20% increase in annual profit

Kenya’s largest bank by asset size, KCB Group, has reported a 20 per cent surge in its full-year earnings, showcasing strong financial performance amidst a challenging economic environment. The bank's focus has now turned towards the Democratic Republic of Congo (DRC) market, where it recently acquired TNB Trust Merchant Bank, aiming to unlock significant value in the upcoming years. Lawrence Kimathi, the Chief Financial Officer of KCB Group, discussed the bank's strategic moves and future plans in a recent interview with CNBC Africa. One of the key highlights of KCB's financial year was the acquisition of TNB Trust Merchant Bank in the DRC, which significantly bolstered the bank's balance sheet. Despite only one month of profits being recognized in 2022, TNB is now contributing 13.5% to the total group balance sheet. The acquisition was a strategic move to leverage TNB's robust balance sheet, deposits, loan franchise, and non-funded income. Kimathi expressed optimism about unlocking the full potential of TNB in 2023, highlighting the bank's commitment to regional expansion and transformation of the economies in the markets it operates in. The bank's presence in South Sudan, a volatile market, has also shown resilience, with KCB Group managing risks effectively and expanding its branch network as the economy shows signs of recovery. Despite past branch closures, the bank has reopened branches in anticipation of growth opportunities, underscoring its long-term commitment to the market. Furthermore, KCB Group's integrated approach with its subsidiaries, such as BPR in Rwanda, has been a key focus in 2022. The bank dedicated significant resources to integrating core banking systems and operations, setting the stage for synergies and growth opportunities in the coming year. Kimathi projected that 2023 would be pivotal in realizing the benefits of consolidating operations and driving the subsidiaries towards higher levels of performance. Looking ahead, KCB Group is actively exploring new markets for expansion, with Ethiopia being a target pending legislative changes. The bank has engaged in preliminary discussions with Ethiopian financial institutions, awaiting regulatory adjustments to activate its entry and partnership plans. Kimathi emphasized the importance of geographic diversification and strategic partnerships in driving the bank's growth trajectory. In terms of financial performance, KCB Group saw a notable 25% growth in net loans, attributed to both organic growth across markets and the impact of recent acquisitions. Kimathi acknowledged the challenges posed by high inflation and external factors but reiterated the bank's customer-centric approach and commitment to meeting evolving market demands. However, amidst the positive financial indicators, Kimathi highlighted key risks on the horizon, including asset quality concerns and cybersecurity threats. The bank remains focused on reducing non-performing loan ratios to single digits within the next year, while continuously investing in cybersecurity measures to mitigate potential risks and safeguard customer assets. As KCB Group charts its course for future expansion and sustainable growth, strategic decision-making, risk management, and regional diversification will play pivotal roles in navigating the dynamic landscape of the financial industry. With a clear focus on enhancing operational efficiency, driving innovation, and adapting to market dynamics, KCB Group is poised to strengthen its position as a leading financial institution in East Africa and beyond.