KCB beats Equity, Co-op, Barclays to record Sh12bn profit

Kenya Commercial Bank beat its top rivals again — Equity, Barclays and Co-operative banks — by reporting the biggest full year profits, which hit Sh12.2 billion after tax.

However, it is Co-operative Bank that recorded the highest growth rate, with its net profits for the year to December 2012 shooting up by 46 per cent to Sh7.07 billion from Sh5.36 billion reported the previous year.

In the same period, Equity Bank withstood high costs of funding, posting a 17 per cent growth in net profit to Sh12 billion on account of high interest income.

Barclays last week announced a Sh8.74 billion net profit for the full year to December.

All the three banks that announced their results on Thursday decried a high increase in the cost of funds following payments on expensive deposits and high interbank rates in the period under review.

“Interest rates rose significantly, discouraging lending and increasing the cost of funding. Our interest expenses stood at Sh8.68 billion, 93 per cent higher than the previous year,” Cooperative Bank managing director Gideon Muriuki, said.

At KCB, the largest bank in East African region by branch network and asset base, the cost of funds rose highest by 170 per cent to Sh12.2 billion.

Equity recorded a 121 per cent increase to Sh6.88 billion in the period.

Of the five top-tier banks in Kenya, only Stanchart is yet to release its annual performance results.

Analysts expect it to post an impressive, given its performance in the nine months to September 2012 when it posted Sh6.4 billion in net profits.

Both KCB and Equity have a presence in Kenya, Uganda, Tanzania, Rwanda and South Sudan, with KCB also operating in Burundi.

In new efforts to maintain its high profit margins, KCB has now embarked on a staff restructuring plan expected to cut its labour costs significantly.

The bank said it would consolidate its operations by investing more in technology.

“We have made strong headway in managing our costs over the past 12 months, despite new investments in Burundi…. This was also helped by automation of income streams collection, cost management initiatives and better utilisation of technology-driven platforms,” KCB’s group chief executive officer Joshua Oigara said during the announcement of the results.

Other banks, including Barclays and Equity, have also announced staff rationalisation programmes in a move to cut costs and to leverage more on technology like mobile banking, Internet banking and new products like agency banking to deliver their services and products.

“We shall continue to grow our agency banking network, which is becoming a significant driver of our business, especially in rural areas. This is a cost-effective model for growing customer deposits and cutting costs,” Equity Bank chief executive officer James Mwangi said.

He further said that agency deposits grew faster than branch deposits in the 2012 financial period.

KCB’s regional businesses earnings rose to Sh1.5 billion from Sh1 billion in 2011.

Equity Bank expects its regional business to contribute at least 15 per cent of revenues to the overall business this year.

Co-op Bank, currently present in Kenya and South Sudan, plans to move to Rwanda and Tanzania where it sees a “significant opportunity”. It also plans to expand its current network of 6,344 agents across the country.