Agency says KCB has adequate capital buffers to take up bigger projects as Global Magazine Ranks it among World’s top banks
KCB Group has a strong headroom to fund bigger projects in the East African region on the back of high capital and liquidity buffers, Global Credit Ratings, an African-focused rating agency says in its latest outlook affirming a stable rating for the Bank.
The Johannesburg-based GCR has affirmed the national scale ratings assigned to KCB of AA (KE) and A1+(KE) in the long term and short term respectively.
This is currently the highest rating for a Kenyan bank accorded by GCR. KCB, along with its subsidiaries, operates as a diversified financial services provider, and is active across the East African region, targeting both retail and wholesale customer segments.
The rating agency said the ratings reflect its intrinsic credit strength and are premised on its established regional franchise, dominant market size, acceptable risk management practices, profitable business model, prudent capital levels and support from its shareholders.
“KCB’s strong market position within the regional banking space makes it well positioned to take advantage of positive growth and infrastructure/other developments within the local economy, and within the East African bloc” said GCR in a statement.
KCB Group CEO Joshua Oigara said the rating was a clear affirmation that the lender was readying itself for a continental race, as it can now take up bigger projects in East Africa and beyond.
“KCB is now running a different kind of race; the race for trillions. Being in the market for more than a century has enabled us to connect with the DNA of the society. The ratings are a confirmation that we are a true heritage of this region and pledge to continue transforming lives and deepening financial inclusion,” said Mr Oigara.
“Throughout the year, we did well to protect ourselves against slow business volumes by focusing on high margin plays and cutting on operational and funding costs. Looking ahead, the management is putting in place strategies that should result in more sustainable future earnings,” he said.
KCB is planning to venture into five new markets in the next ten years, with an eye on Ethiopia, Zambia, Somalia, Djibouti, Mozambique and the Democratic Republic of Congo.
The Bank’s growing role in the African financial services market saw it feature prominently in the 2015 Banker's Top 1000 World Bank Rankings. KCB was ranked 833rd, up 13 places from last year among Top 1000 banks globally, in rankings released last week.
The banking group continues to build capital at a rate in excess of what is being consumed for organic growth, with a capital adequacy ratio of 21% in the financial year ending December 2014. Furthermore, the group’s capital base is deemed adequate to absorb potential termination and/or credit losses under our business stress scenario, said GCR.
The 2014 full year financial results indicated that the Bank’s
KCB Bank Group has posted an 18% rise in full year 2014 pre-tax profit, riding on double-digit growth in balance sheet and non-funded income and all subsidiaries returning positive earnings. During the 12 months ending December 2014, profit before tax jumped from KShs 20.12 billion to KShs 23.79 billion while its balance sheet hit the half a trillion shillings mark— at KShs. 510.3Billion. Despite gross loan growth of 24.3 per cent in the last financial year, KCB’s overall asset quality position improved, with the gross non-performing loan ratio declining from 8.1 per cent in 2013 to 6.3 per cent the in 2014. “The loan pool is suitably covered, via provisions and capital, to absorb an unexpected increase in impairments. KCB’s capital base remains adequate to support its current business structure, whilst providing capital cushion for loss absorption,” said GCR.
“Liquidity buffers were deemed sufficient. The group maintained an average net liquid asset to customer deposits ratio of 44.8 per cent last year which was well above the minimum requirement of 20 per cent,” it said.
KCB Group’s has been on the forefront in offering innovative products and solutions that meet the dynamic demands of customers in the changing world of technology. The Bank’s recent partnership with Safaricom to offer loans through the mobile phone has been a game-changer in the financial services sector.
Global Credit Rating rates the full spectrum of security classes and accords both International Scale and National Scale ratings, and together with its international affiliates, rates almost 3000 financial Institutions, insurance, Corporate and Public Sector Debt.
